Ask Noel

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

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

I am 63 and retired with $900,000 in super, and two years ago I inherited 5000 CBA shares. I have been enjoying the dividend and franking credits but am wondering if I am too exposed with the CBA holding. I am considering selling some of the shares and buying into an index fund such as the ASX200. What would be your advice?

You certainly have a large proportion of your assets in the CBA shares, and I agree that it would be prudent to have a long-term strategy to diversify. What concerns me is that you have inherited any capital gains tax liability that goes with the shares and could lose a big chunk of the proceeds in capital gains tax if you sold them. Also, if you sold the shares and bought the ASX 200, you would still have a large part of capital in the four banks as they represent a major part of that index. Obviously, you will need to take advice, but if it was me I would hold them but invest the dividends in other areas. Over time this should increase your diversification.

I am 66 and single, and run my own super fund - low-risk and conservative - which provides me with more than enough to live on. I own my home and have no debts. There may come a time when someone else will have to run my financial affairs and I would like to choose my own super-fund provider while I am able to do so. How easy is it to move the assets in my fund to another fund? Would it entail cashing in investments and selling off shares? What are your thoughts on this matter?

You could certainly roll the balance of your super to another fund, but that fund may not accept the transfer of assets in specie. Therefore, it may be necessary to liquidate the assets before rolling the funds over. If your fund is in pension mode, this should not be a problem as it would be tax-free. However, there will be transaction costs such as brokerage to consider.

In a recent article you suggested, "It may be a good strategy to sell the shares and use the proceeds to reduce the mortgage on the property you are going to buy. You could then borrow back to replace the shares, and the interest on this new loan would be fully tax-deductible." My wife and I have combined super of $100,000, $120,000 in shares, and a mortgage of $250,000 on a home worth $800,000. Is it possible to sell our shares to reduce the mortgage and borrow to replace the shares, as you mentioned above, or is that only if we were buying another property?

You should be trying to maximise your deductible debt while minimising your non-deductible debt, which is why your goal should be to get your house paid off and borrow to fund your investments. You can certainly sell an existing asset, pay off home debt and then borrow back to buy another income-producing asset - it can be property or shares - but the limiting factor is the transaction costs and capital gains tax in selling and rebuying. This is why it's important to involve your accountant and do your sums before you take action.

I am 60 and retired, but do some casual work. I am about to sell an investment property and expect to make a capital gain of $160,000, bringing my taxable income to $80,000. Can I contribute $35,000 of this capital gain to my super fund as a concessional amount and pay 15 per cent tax instead of whatever my MRT will be (maybe 37 per cent but at least 32.5 per cent)?

If so, what mechanism is required? Do I have to inform the ATO or my accountant?

Provided no employer is paying superannuation for you, you are entitled to make a concessional contribution to superannuation and claim a full tax deduction for that contribution. Your accountant will do the paperwork. Just make sure you confirm that you are not receiving any employer superannuation in the financial year you make the concessional contribution.

The explainer

Passing property to next generation

My husband and I invested in a property for our daughter to live in 16 years ago. We are about to make our wills and would like to leave this property to our daughter. The payments she makes cover the mortgage. How would this affect our pension?

If you are receiving a pension now, nothing will change if you leave the property to your daughter in your will, as you will still own the asset. You could investigate giving the property to her and then five years later it would cease to count for Centrelink purposes. Obviously you would need to consider the possible capital gains tax implications of doing this as the potential tax payable may far outweigh any future gains in the aged pension. There would also be stamp duty and other fees to consider.

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