Our son and his partner bought separate homes before they met. He is a sole property owner with his own mortgage, and his partner was living in a house built with her sister on which she has a 40 per cent mortgage. She works part time and has a child. The problem is that my son and his partner want to move into my son's home, but his partner doesn't want to rent her portion of her house to help pay her loan. They are not in a position to sell because there is no equity in the home. My son doesn't have much equity in his property. They would like to have more children and are concerned about how she would pay her share of her mortgage. What's the solution?
This is more a relationship question than a financial one. The couple need to sit down together and prepare a budget to explore how they would fare financially in two scenarios: if the property were made income-producing and if it were not. They should also include the cost of having more children. This might give them quite a shock and help resolve the issue.
I am the only member and a joint trustee of a self-managed super fund (SMSF). If the other trustee should become unable to continue in this role, can I remain the sole trustee? If I can't remain the sole trustee, can I transfer shares into my name and wind up the fund without having to sell the shares?
In a single-member SMSF, you need another person to act as a trustee you cannot be both a sole trustee and sole beneficiary. You will need to appoint another individual as a trustee, or convert your SMSF into one with a corporate trustee, in which you are the sole director of a company that will act as the trustee. Another way is to transfer your super account to a retail fund and wind up the fund. To do that you will first need to sell the shares and then transfer the balance to the new fund. You can access the funds only if you have met a condition of release, such as retirement or reaching 65 years.
I recently updated my will through the NSW Trustee. I believe the existing laws are discriminatory because I must leave the funds to "my estate" so it goes to my beneficiaries, namely a sister, niece and grand-nieces and nephews, because I have no dependent children or a spouse. The NSW Trustee must then charge my estate with the executor costs for giving funds to the beneficiaries. The Superannuation Act seems to stipulate who can be a beneficiary. Is this correct?
That is the law. Under regulation 6.22 of the Superannuation Industry (Supervision) Regulations 1994, a death benefit can be paid only to a member's legal personal representative or one or more of the member's dependants. The term "legal personal representative" is defined as the executor of the will or administrator of the estate of a deceased person, the trustee of the estate of a person under a legal disability or a person who holds an enduring power of attorney granted by a person. The term "dependant" is defined to include the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship. Consequently, if you have nominated the NSW Trustee to act as your executor and you do not have any dependants, your death benefit will be paid to the executor.
I have money in a redraw facility in my investment property, which I would like to redraw to spend on my home. My tax agent says this will have tax implications with claiming interest on the amount I redraw. Is this true, and if so what are my options? Also my superannuation has remained static or gone backwards at times in the past few years. Do you think I should put it into a cash option? I plan to work for another five years before retiring at 60.
Your tax agent is correct, you cannot claim a tax deduction on money borrowed for a private purpose. Make sure you keep your investment borrowings separate from your non-deductible ones because this will save you fees at tax-return time. You are only 55, which means you might have at least 30 years ahead of you this is why it is important to take a long-term view of your super and not try to second-guess the markets. Your adviser should be able to help you make the right choice.
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. Email: email@example.com.
In 2006, my husband and I retired on an age pension. We had just $50,000 each in super, which we placed into an allocated pension fund from which we receive a monthly payment of $200 each. The fees we are being charged seem very high and are eating into our small lump sum management costs are $220 and ongoing fees $640 a year each. Are these charges high and are we able to change fund managers? If so, how do we go about this and will there be any fees for the changeover?
If you are on the age pension and have few assets apart from the money you are holding in super, I see no point in keeping it there. You would enjoy the same tax benefits if you kept the money outside the super system and would not have the expense of fees. Just make sure your financial adviser does the numbers to confirm that this is correct because there may be other issues you have not mentioned.