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I'm 49, earning $65,000 and my wife is 44, earning $55,000. We have two kids, 14 and 11. We're thinking of moving to another suburb for better schooling. Our home has a mortgage of $260,000 with $450 weekly repayments. It's worth $400,000. Do you suggest we sell our home and buy in the new location, or should we rent out our home and rent near the school?

By InvestSMART · 1 Sep 2012

By InvestSMART ·
1 Sep 2012

Comments

In view of your relatively low incomes and the high cost of selling and rebuying, my preference is to rent elsewhere, but keep the present home, provided you are happy to live in that home when the children have completed school. You would receive substantial tax concessions and would not lose the CGT exemption provided you returned to the property within six years and did not claim any other properties as your principle residence in that period.

I read about Retirement Savings Accounts and their role in self-managed super funds. I have cash and term deposits. What's the difference between a RSA and deposit account in the name of the trust and the advantages?

An RSA is a bank account that sits within the super system. They were originally designed as a simple, low-cost product for small super balances. You could shop around but you will most likely find the best investment for your SMSF is a high-yielding term deposit with one of the major institutions.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice before making decisions. Email: noelwhit@gmail.com.

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Frequently Asked Questions about this Article…

Should we sell our home and buy in a new suburb for better schools or rent out our home and rent near the school?

Given your relatively modest incomes and the high costs of selling and rebuying, the article’s preference is to rent near the school and keep your current home — provided you’re happy to return to it once the children finish school. This can avoid large transaction costs and preserve future options.

Will I lose the main residence capital gains tax (CGT) exemption if I rent out my home while living elsewhere?

You will not automatically lose the CGT main residence exemption if you rent out the property, provided you return to the home within six years and do not claim any other property as your principal residence during that period. That rule keeps the exemption intact in many temporary rental situations.

What kind of tax concessions can I expect if I rent out my house instead of selling?

The article says you would receive substantial tax concessions if you rent out your home and meet the conditions for keeping the main residence exemption. Specific tax outcomes depend on your circumstances, so seek professional advice to understand how concessions apply to you.

Are the costs of selling and rebuying a home significant enough to prefer renting temporarily?

Yes. For households with relatively low incomes, the article notes the high cost of selling and rebuying can make renting elsewhere while retaining your current home the more cost-effective and flexible option.

What is a Retirement Savings Account (RSA) in a self-managed super fund (SMSF)?

An RSA is a bank account that sits inside the superannuation system. It was originally designed as a simple, low‑cost product for smaller super balances and operates within the SMSF/super framework.

How does an RSA differ from a deposit account held in the name of the SMSF trust?

An RSA is a superannuation product held within the super system, while a deposit account in the name of the trust is a traditional bank account held by the SMSF. The article suggests you can shop around, but for many SMSF cash balances a high‑yield term deposit with a major institution may be the best investment choice.

If I have cash and term deposits in my SMSF, should I move them into an RSA?

You could use an RSA, but the article indicates that the best investment for many SMSFs is likely a high‑yielding term deposit with one of the major institutions. It’s worth comparing RSA offers versus term deposits to find the best return for your SMSF.

Can I rely solely on advice in this article for my financial decisions?

No. The article notes Noel Whittaker’s comments are general in nature and recommends readers seek their own professional financial advice before making decisions. If you want to follow up, the author’s contact was provided in the article for further queries.