Ask Noel

I'm the trustee of a self-managed super fund (SMSF) that was rolled over in 2008 to a pension fund. The fund has two members: my wife and myself.

I'm the trustee of a self-managed super fund (SMSF) that was rolled over in 2008 to a pension fund. The fund has two members: my wife and myself. When the fund was in the accumulation stage, it was a requirement that at the end of every financial year, a chartered accountant should assess the accounts and certify that they were kept according to SMSF regulations. When the SMSF is in the pension stage, revenue is tax-free and I can withdraw any sum, as long as it is more than the minimum specified by the government. Does an accountant still need to certify that the pension-fund accounts are kept according to SMSF requirements or can I declare it on my personal income-tax returns and save about $1000 a year?

The SMSF accounts need to be audited each financial year, even if the SMSF is in a pension-payment stage. You can prepare your own SMSF annual tax return if you have the knowledge and expertise, but the accounts still need to be audited by an independent approved auditor. You cannot audit your own fund.

I bought a house worth about $380,000 years ago. Last year, I received a redundancy package and deposited the money into my redraw facility. This effectively took my mortgage to nil. The bank loans manager advised me that doing so would ensure I wouldn't have to make any more periodic payments on my mortgage while unemployed. I've since discovered I should have put the money into my offset account, that way the tax office would not have deemed the mortgage "paid off". I'm thinking of buying an investment property for retirement. My plan is to buy a city apartment, live in it and rent out my current property. But I heard that I may not be able to get the tax benefits of negative gearing because I've effectively paid off my mortgage. Is this true? Can I take that money out of my redraw facility to buy the property and claim the interest deduction on my current property since I plan to rent that out?

You have pointed out the dangers of paying off a deductible debt. Unfortunately, you can't unscramble the egg and any loan taken out to buy a property to live in will not be deductible, irrespective of the property mortgaged.

I'm 39, single, earn $135,000 and am on track to earn another $100,000 in commissions. I have $130,000 in a high-interest account, no property or shares and only $60,000 in super. I made bad share decisions in the past, such as Babcock & Brown, so I'm understandably wary of the sharemarket. I'm looking to buy an apartment in the $600,000 range, to live in it for a year or so then rent it out. As I pay so much tax, how can I minimise it? Would you pump more money into super at my age?

There is little you can do to reduce your tax bill, apart from maximising the amount you sacrifice to super and using your $130,000 in the bank for a deposit on a property to eliminate assessable interest. Remember, your maximum tax-deductible contribution to super is $25,000 this includes your employer's compulsory super guarantee contributions. If you have your heart set on an apartment, make sure you take a long-term loan to minimise compulsory monthly payments, and accumulate your spare money in a separate offset account. This will enable you to maximise tax deductions when you move out of the property and it becomes a rental.

A couple of years ago, my daughter, now eight, earned $2000 for photographic modelling work. I used the money to buy shares in BHP with a view to handing them to her when she turned 18, perhaps adding more along the way. I seem to recall you suggesting in similar circumstances that it would be wiser to put the money into some kind of managed fund. What do you recommend?

A minor cannot buy shares so I assume you bought them for your daughter in her name with you as trustee. Provided you maintain a strict and separate trustee relationship, you may be able to transfer them to her free of capital gains tax when she turns 18. Any money invested from her own efforts, such as modelling, is exempt from the punitive children's tax, so make sure you keep earned monies strictly separate from unearned monies. It is up to you to decide whether you want to continue investing directly in shares or use managed funds.

Advice is general readers should seek their own professional advice.

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

I feel sure I have read that investors who have property in different Australian states need current wills relating to the state the property is located in because wills don't cross state borders. I attended an investment seminar recently where some of the attendees mentioned having investment properties in several states. Could you please clarify the situation for me?

You can make a valid will in any state of Australia, which will be recognised in the other states and apply to any property you own in those states. You do not have to have a will for each state where you may have property. Wills made in another country would also be recognised in Australia.

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