My 38-year-old daughter is single, earns $150,000, and owns an investment unit, the rent from which helps pay off the $380,000 mortgage on her principal place of residence.
I have suggested she should start her own self-managed super fund and put the property she owns into the fund as well as salary-sacrificing, thereby minimising her income tax. She has decided her first priority is to pay off her loan and she needs the rent from the investment property to help do that.
Is there any way at her age she can put the property into an SMSF, salary-sacrifice a sum into the SMSF and draw a slightly lesser amount from the super fund on a regular basis to maintain her cash flow for living expenses?
This would be a very bad strategy. For starters, the superannuation rules do not allow her to transfer her investment property into her own fund and, even if she could, there would be transfer costs and possible capital gains tax to be paid. Furthermore, she would lose access to her funds until she reaches her preservation age, which, at present, is 60. Her best option would be to keep the loan on the investment property on an interest-only basis and focus all her energies on paying off her home loan.
I am 72, and have $100,000 in a private pension fund paying the minimum $300 a month in an allocated pension. My wife is 65 and has $300,000 in a super fund paying the minimum allocated pension. We also receive a part pension from Centrelink and are assessed on the assets table. We own our home, have no debt, but do have $100,000 in cash and $200,000 in shares.
I have recently established that on my $100,000 pension I am paying close to 5 per cent in managers' fees, admin and adviser fees. This is greater than my allocated pension. Do you think we should cash in the private pension fund and invest the proceeds into blue-chip shares, paying a dividend equal to or greater than the allocated pension? While understanding there is an element of risk in shares, I feel I would save on fees, pay no tax and be able to cash in on the franking credits.
There is no easy answer because closing the allocated pension fund would mean you would lose the tax and Centrelink benefits that go with superannuation pensions — at your age it may be extremely difficult to transfer the funds back to super if you discovered you'd made the wrong decision. Also, an unintended consequence may be that you could move from the asset test to the income test. Your advisor should be able to do the numbers for you but the simple solution may be to seek a lower-cost pension provider.
I am an 80-year-old self-funded retiree with a share portfolio containing shares above and below purchase price. I have accumulated losses of $100,000. Will these losses carry over to my estate or would they be lost in the event of my death?
You have not made it clear whether the losses are realised or unrealised. If they are just paper losses at this time and the shares are post-1985, your beneficiaries will inherit them at the price you paid for them. In that case, the losses will be realised when the beneficiaries sell. If they are
carry-forward losses that have actually occurred, they will be lost on death.
My husband had his life insurance policy within our SMSF. He passed away recently and the benefit was paid into the super account tax-free. I am now receiving a pension income from this benefit that is being taxed. I am 56 years old. I wonder if this income will always be taxable or if when I turn 60 that will cease.
The income should be taxable now less a 15 per cent rebate — when you turn 60, it should be tax-free.
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: email@example.com.
I am 63 and still working. I salary-sacrifice $25,000 into super and draw a transition-to-retirement pension. My wife is 62 and retired. I intend to retire at 65 or do part-time work for two or three days a week. I have $400,000 in super and she has $200,000 in super. We have $170,000 in shares. We own our home. Can my wife withdraw money from her super now to give $50,000 to our son to help him purchase a first home? Are there any restrictions on this gift? If gifted, will this be taken into consideration at 65 when she can apply for the age pension? At 65, will our super and shares amounts be included in the assets test? I assume any part-time income will be included in the income test.
As your wife is aged 62 and retired, she can make tax-free withdrawals from super whenever she wishes. There are no restrictions on what she does with the money but any gifts for the preceding five years will be taken into account by Centrelink when she applies for her pension.
Your super as well as your shares will be taken into account for both the assets and the income test, but a special test applies when you are drawing an income stream from your super. The income you earn from part-time work will be included in the income test but the first $125 a week will be exempt. Make sure you work with your adviser between now and when you retire.