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Ask Noel

Each week, financial adviser and international best-selling author Noel Whittaker answers your questions.

Each week, financial adviser and international best-selling author Noel Whittaker answers your questions.

My wife and I are 62, recently retired, and own our house. We have $1.6 million in a self-managed super fund plus $400,000 in shares, a $400,000 investment property with no mortgage, and cash. We would like to withdraw all the money and put two amounts of $450,000 into a retail super fund, and keep $700,000 in cash. We plan to have the property transferred either to our names or preferably to our only daughter, to own and live in. Is that possible or do we have to sell it? What's the best way without excessive transaction/stamp duty fees?

You do not need to withdraw all the money in your self-managed fund to transfer them to another fund, merely roll the balance into the new fund. If you are keen to reduce the taxable component of your fund, you could make withdrawals tax-free and then recontribute as a non-concessional contribution. If you transfer the property to your daughter, you will be liable for capital gains tax based on the market value at the time of transfer. Alternatively, you could leave it in your name, let her live in it and leave it to her in your will. This would save capital gains tax and stamp duty. If you do decide to transfer the property to your daughter, you can do it directly - you do not need to involve a third party.

I have a friend who is retired on the age pension and has 800 Commonwealth Bank shares worth about $73 each. What would be the best way of selling and would she have to pay capital gains tax?

I wonder why she would want to turn the entire investment to cash - there would be no benefit from a Centrelink point of view, and the $58,000 deposited in a bank would most likely earn less in the long term than if the shares were retained. A major benefit of shares is that they can be redeemed in part. Being a pensioner, selling them down over a few financial years would most likely see no capital gains tax payable. She could talk to a broker or investigate online brokers such as CommSec.

I have willed my share portfolio to be divided equally between my three children and wish each of them to have the choice of retaining the shares or selling them. If they decided to sell them within two years of my death, would the proceeds be free of capital-gains tax?

The two-year rule applies only to the family home - the beneficiaries will inherit the shares at the cost base of the deceased, unless they were acquired before September 20, 1985, when capital gains tax was introduced. In that case, they are deemed to be acquired at their market value at date of death.

My wife and I want to take out a mortgage to buy an existing property, and use the 95 per cent equity in our current residence to borrow for the deposit on the new property. We would like to remain in our house and rent out the new property for a few years, after which the new property would become our residence, and our current residence would be available to rent out. Can the potential tax benefits of negative gearing apply to our present residence, after we relocate to what is presently an investment property?

For the interest on a loan to be tax-deductible, the purpose of the loan must be to buy an income-producing asset. The property mortgaged has no relevance. If your current home is debt-free and you mortgage to buy a new residence, you will find yourself with a large non-deductible loan on your residence while paying tax on the rents. To make matters worse, your home will almost certainly drop in value when you move out and the tenants move in. A better strategy may be to sell the home now free of capital gains tax, have a large deposit for the new home, and then explore other investment options.

I earn $52,000 a year and plan on "conservatively" borrowing to invest up to $100,000 in a mix of Australian shares. How would I secure the best investment loan available? Are there investment loans where you can make extra repayments to pay it off quickly, similar to a variable home loan?

Provided you have a secure income, the ideal situation would be an interest-only loan that is secured by a home-equity loan over your residence. This would obviate the possibility of margin calls, minimise interest costs, and maximise resources for building the share portfolio.

Now's the time to make retirement plans

The explainer

My wife and I owe $2000 on our home loan, plus $100,000 in a redraw facility, but have no other debts. I am 54, working full time, and my wife, 64, does casual work. I put $50 in my super every week and want to know what else we can do to secure our finances.

Because your house is virtually paid off, every week you should be investing at least the amount you would be paying in rent if you did not own a home. For starters, make sure your total concessional contributions to super total $25,000 a year, including your employer's compulsory 9.25 per cent. If your wife is a low-income earner, make sure she makes a contribution to super of at least $1000 a year to be eligible for the $500

co-contribution. Finally, speak to an adviser before your 55th birthday to explore the benefits of a transition-to-retirement strategy.

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