Ask Noel

MY DAUGHTER is about to become unemployed and wants me to purchase her house, valued at $300,000. She wants me to pay the $180,000 she owes on it, as she simply wants to offload it as she will be unable to pay the mortgage each month. The house would be an investment property for me. I understand that the Tax Office would expect me to pay tax on the $300,000, which I would do but is it legal to buy a property at a much lower price than its actual value? Alternatively, is there a better way for ...

MY DAUGHTER is about to become unemployed and wants me to purchase her house, valued at $300,000. She wants me to pay the $180,000 she owes on it, as she simply wants to offload it as she will be unable to pay the mortgage each month. The house would be an investment property for me. I understand that the Tax Office would expect me to pay tax on the $300,000, which I would do but is it legal to buy a property at a much lower price than its actual value? Alternatively, is there a better way for me to do this to help my daughter?

If your daughter sells the property to you there should be no capital gains tax payable by her if it was her main residence for the full ownership period. Therefore, she should be able to sell it to you at any price that you agree on. Make sure you take legal and accounting advice before any documents are signed, because you will be liable for capital gains tax when you sell it and buying it for a low price now will create a bigger tax liability whenever you come to sell it. The alternative strategy is to simply assist your daughter with her mortgage payments until she gets back on her feet.

I am 35, single and own my home outright it is worth $330,000. I have about $30,000 in savings, earn $45,000 a year (plus company car) and own a second vehicle, which gets used only occasionally. I have no debts. Can you give advice on suitable investments to "grow" my money instead of it sitting in a bank? Should I look at shares or investment property?

I doubt you have enough to buy a property in view of your low income and, in any event, you have the bulk of your assets in the residential property basket now. I suggest you talk to an adviser about diversifying into quality share trusts the benefit of these is that you can start small and increase your investment as your confidence grows.

I am 58 and on a disability pension, which paid me $11,000 last year. I also earned $14,700. I have $25,000 in superannuation and a house worth $450,000 with no debt. I have inherited $120,000 and would like to know the best way to invest my money to assist me in the future. The interest is taxable and affects my pension. Should I put it into super or is there a better option?

There is no doubt that contributing the money to super as a non-concessional contribution is the best strategy. Even though the earnings will be taxed at 15 per cent, which is the same rate as you are paying now, neither the asset nor the income will be assessed by Centrelink until you reach 65. But take advice, as there are heavy penalties for exceeding the caps. Another option is to start a transition-to-retirement pension as long as you draw down the minimum payment there shouldn't be any additional amount assessed under the income test. Remember, too, that any surplus funds can be recontributed to super as a non-concessional contribution.

I was once advised that to calculate the amount of funds I would require to retire on at age 60 I should multiply my required annual income by 15 (obviously only a general rule). I will turn 60 in April next year therefore, should I require an annual income of, say, $40,000, I would need a sum of $600,000. This will only last me 15 years to age 75 without even allowing for inflation and I certainly intend to live past that age. Are you aware of this formula and can you shed any further light on it, please?

I have always used 12, not 15, as the number but you must understand it is a very rough guide, as the amount you need depends on a range of variables that includes how long you will live, how much you spend, the return on your funds, the state of your health and your taste in travel and wine. To make it even more complicated, your Centrelink benefits go up as your capital goes down. However, if you retired at 60 with capital of $600,000 and it earned 7 per cent and you withdrew $40,000 a year indexed at 3 per cent, the money should last until age 82. Don't forget you can boost your superannuation before you retire by extra salary-sacrificed contributions or by working, even part-time, for a bit longer.

I am the sole earner with a salary of $90,000. I am 48 and will soon receive about $40,000 from my employer. I have superannuation of $220,000 and pay the maximum permissible $25,000 into my super every year. From next month I will earn only about $80,000. I am seeking your input in terms of where to best invest to minimise tax on that $40,000. I owe about $40,000 on my home mortgage (valued at $900,000) and an investment property worth $500,000, on which I owe $300,000.

My preference is to pay the money off the mortgage. This will give you the equivalent of a capital guaranteed tax-free return of 6.5 per cent. Once the house is fully paid off, you could take advice about some conservative borrowing for investment.

Advice is general readers should seek their own professional advice.

Contact noel.whittaker@whittaker macnaught.com.au. Follow him on Twitter: @noelwhittaker. Questions to: Ask Noel, Money, GPO Box 2571, Qld, 4000, or see moneymanager.com.au/ask-an-expert.

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