Each week, financial adviser and international best-selling author Noel Whittaker answers your questions. firstname.lastname@example.org
My wife is 60, I am 64 and we have $622,000 in super. I want to retire within the next two years, and plan on making a $150,000 non-concessional contribution to my wife's super to maximise my Centrelink entitlements once I retire.
Can I directly transfer the $150,000 out of my super into my wife's super account? Do I have to be retired to access my super and withdraw from it? Is $150,000 the maximum amount allowed a year?
You will need to make a withdrawal that should be tax-free as you're over 60, and then give the money to your wife, who can then make a non-concessional contribution. As you have not yet reached 65, you need to satisfy a "condition of release" to access your super before 65 - this involves resigning from a job (it need not be your main job). Provided you are aged 64 or below, you can bring forward two years' contribution limits and make a one-off non-concessional contribution of $450,000.
I am 57, married with two adult sons. I work full time on a gross income of $150,000. My wife does not work but we own our own home worth $1.3 million and should have enough super for my retirement in three years. Our son is on a disability support pension and works 15 hours a week with help from a disability employment service provider. He lives at home and is moderately independent. We would like to secure his future living arrangements whatever may happen to us — we accept this could even include having to sell our house to fund aged care.
We have thought about purchasing a unit for him that would be paid off before I retire. We would initially need a loan, so the property would be bought in my name as an investment, which would give some tax benefits over the next few years. Our son would live in the property later and I would leave it to him in my will to avoid paying capital gains tax and stamp duty on an earlier transfer. This would also protect the property from any claims by a future partner for as long as possible. Does all this make sense if we can afford to do it? Have we missed anything, and are there any other options?
That strategy seems fine, but you should talk to a solicitor about leaving assets to him via a testamentary trust and not to him directly. This will give him protection from potential creditors after you die. Also discuss a special disability or protective testamentary trust that could protect him from creditors and even preserve his Centrelink entitlements.
I started salary sacrifice in 2000 and have contributed a total of $241,807. I've paid 15 per cent in tax — $33,071, so the net gain is 0.93 per cent in 12 years. Compared with this, a fixed deposit would have given me 4 per cent to 6 per cent. Do you think I should terminate the salary sacrifice?
When you salary sacrifice to super, you are moving money to an area where income tax is just 15 per cent and capital gains tax 10 per cent. This is obviously a better tax environment than if you held the funds in your own name. It does seem a poor performance when you consider that $1300 a month invested in the All Ordinaries Accumulation since January 2000 would now be worth $339,000 for a total investment of $202,800. I recommend you seek advice with the aim of rearranging the assets you are holding inside super to achieve a better outcome.
Will I have to pay capital gains tax (CGT) on a home that was our principal residence for 13 years? We had to rent it out when we moved into a new home we built, as we had not been able to sell before moving. At the time it was sold, we had received rent for five months.
You can be absent from your residence for up to six years without using the CGT exemption as long as you didn't claim any other property as your principal residence within that time. From the information provided, I doubt if you need to worry. Don't forget to claim a tax deduction for the interest and other costs while it was rented.
Roll the dice on strategic advice
My husband is 36, earning $90,000. I am 37 and returning to full-time work in January on $200,000 a year. My husband will work part time earning $30,000 in 2014, then will move back to full time later in the year. We have paid off our mortgage and our house is worth $1.4 million. My husband's super is $100,000; mine is $220,000. We have just sold out of shares, making a small profit and have $30,000 in savings and no other debt. What would you recommend to grow our wealth? We would like to retire at 55.
You have done extremely well to date and this is the perfect time to be forming a relationship with a good adviser and work on specific strategies to achieve your goals. My preference would be borrowing against your residence for share-based investments, and I prefer this be done through managed funds to give you more diversification than you could achieve on your own. On your incomes it would be a good idea to consider some salary sacrifice as a means of saving income tax and bolstering super reserves.