Ask Noel
I am 36, single, rent at $200 a week near the beach and love the lifestyle. I earn $110,000 a year, have a managed share portfolio worth $26,000, savings of $118,000 and no debts. My super is $65,000. I have been thinking of investing in property to have an appreciating asset that will help me build equity, so in future I can use that equity to buy a home. I'm not sure if that would be a good strategy, or whether it's better to save the deposit to buy a home then pay it off and live off my super. I would like to invest in property soon. What are the pros and cons of investing in property now?
To optimise your affairs for tax purposes you should be trying to minimise your non-deductible debt and maximise your deductible debt. This is why a strategy of buying investment properties with the aim of using the equity to buy your own home would be unsatisfactory because the interest on the loan to buy the house would not be deductible and you would pay tax on your rental income while being stuck with a large non-deductible mortgage on your home. A better option may be to buy the home first and reduce the loan as much as possible - you could then borrow against the equity in the home for investment. The interest on this loan would be tax deductible.
Recently you mentioned that wherever possible, super should be in the wife's name. I am able to claim the aged pension, although my husband will not be eligible until October and I will be working three days a week. Should we put money into my super?
I never said that super should always be held in the wife's name - there is a range of factors that determine the best person to hold the bulk of the super. If one partner is considerably older than the other, you gain access to your super faster if it is held in the name of the older partner. If Centrelink benefits are the main consideration, the super should be held in the name of the younger where it is not counted by Centrelink until that person reaches pensionable age.
I am 72 and my wife earned $89,000 last year. We have a son at university who gets $120 a week Austudy and I get $75 a week British pension. We own our home, which is valued at $550,000. We have built another house, which we want to move into when we sell this one. This house is valued at $750,000 and we owe $400,000 on it. My daughter lives in this house rent free. Can I claim a part pension or get a health care card? I've had cancer.
The cut-off point for the income test for pensioner couples is $70,345 a year, so you will not qualify. The decision is whether it is financially effective to reduce your wife's income to a level where you would qualify for a part pension.
The Commonwealth Seniors Health Care Card is available for couples over 65 who have a combined adjustable taxable income of less than $80,000 a year. You won't qualify for this either.
Good advice the key to a happy retirement
The explainer
I seek your advice on how much I need to retire. I am 58 and earning $64,000 a year. My wife is 49 and earning $22,000 a year. I have $550,000 in super and we have $400,000 in term deposits and managed funds. I am thinking of retiring at 60 and possibly working part-time. We have a no-frills lifestyle. What are your suggestions on our position? I am totally confused by what I read.
If you have a no-frills lifestyle you probably need about $50,000 a year in retirement. Based on the rule of thumb that the amount needed in retirement is your required income multiplied by 12, it would seem $600,000 would be sufficient. That is a very rough figure because the amount of money you will need depends on a number of factors such as how long you live, the state of your health and whether your children come looking for a handout. You also have to take inflation into account. It would seem you are better placed for retirement than the average Australian but it's important that you have a relationship with an adviser and monitor your progress on at least an annual basis — this will enable you to make changes to your portfolio as necessary.
Frequently Asked Questions about this Article…
Buying an investment property to build equity can work, but the article warns it can be unsatisfactory if your plan is to use that equity to buy your own home. You would be taxed on rental income and end up with a large non-deductible mortgage on your home, while interest on the home loan is not tax deductible. A better approach suggested is to buy your home first, reduce the loan as much as possible, then borrow against that home equity for investments so interest can be tax deductible.
The key tax difference is deductible versus non‑deductible debt. Interest on loans used to buy an investment property (or loans used to invest) can be tax deductible, and rental income is taxable. Interest on a mortgage for your owner‑occupied home is not tax deductible. Using investment equity to buy your home can leave you with taxable rental income and a large non‑deductible home loan — a mixed tax outcome many advisers consider inefficient.
One effective strategy described is to buy your home first and reduce the mortgage, then borrow against the home’s equity to fund investments. That loan used for investment purposes may have interest that is tax deductible, whereas the interest on your primary home mortgage generally is not.
There’s no blanket rule that super should always be in the wife’s name. The article explains it depends on factors like relative ages and Centrelink objectives. If one partner is considerably older you can access super earlier if it’s in their name; if Centrelink benefits are the priority, holding super in the younger partner’s name can sometimes mean it’s not counted until they reach pensionable age. Consider your specific ages and Centrelink position before deciding.
According to the figures in the article, the income test cut-off for pensioner couples is $70,345 a year, so a couple above that level would not qualify for a part pension. The Commonwealth Seniors Health Care Card is available to couples over 65 with combined adjustable taxable income under $80,000 a year — if your combined income exceeds that, you won’t qualify for the card either. The article also suggests evaluating whether it’s financially effective to reduce a partner’s income to become eligible.
For a no‑frills lifestyle the article suggests about $50,000 a year in retirement. Using the simple rule of thumb given — required income multiplied by 12 — that implies roughly $600,000 in savings. This is a rough guide: your actual need will depend on life expectancy, health, possible financial support to children, inflation and other personal factors.
The article recommends assessing your required retirement income, comparing it to your super and savings, and working with an adviser. For example, monitor progress at least annually, consider part‑time work in early retirement if needed, and adjust your portfolio over time to match your goals and risk tolerance.
A financial adviser can help set realistic retirement targets, recommend tax‑efficient borrowing and super strategies, and adapt your investments as circumstances change. Annual reviews let you monitor progress, make necessary portfolio changes, and respond to life events — helping you stay on track to meet retirement and Centrelink goals.
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