Ask Noel

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

My husband and I won a house worth $900,000 and a unit worth $352,000. The house we won is still on the market. We sold the unit for $360,000 in July, as well as the house we lived in for 15 years. We bought another house for $700,000, which we now live in. We still owe some money on the new purchase. Will we be expected to pay capital gains tax on the sale of the unit and the $900,000 house when it sells, even if it was received as a prize?

You will only pay CGT on any increase in value between winning the properties and selling them, but after selling and holding costs, this may not be much. There is no tax on the original market value of the prize.

Do you have an opinion about buying property through a self-managed superannuation fund?

My view is that you maximise profits when buying property by borrowing as much as your budget can afford. Therefore, my recommendation is to keep your super fund for interest-bearing accounts and shares, and to buy property outside the superannuation environment using borrowed funds.

I am 45, have no debt, own my home, and have a combined income with my wife of $155,000. I am considering buying an investment property to reduce my taxable income. This was going to be an easy decision, but with the doom-and-gloom forecasters predicting a housing bubble followed by a bust, I have had second thoughts and would prefer to delay this decision for 12 months. Do you know of another tax-effective option into which I can place my income, or should I invest in property to not miss out on the current property increases?

You should never make an investment for tax reasons alone, but in any event the purchase of a negatively geared property won't reduce your tax bill very much when the income from that property is added to your taxable income. I am in favour of borrowing for investment, but you should regard the tax benefits as the cream on the cake and not the reason for the investment. There are mixed opinions on the future of property in Australia, and you will have to form your own opinion. Just be aware that the popularity of the location is one of the main factors that drives population growth. You could reduce your taxable income a little by salary sacrificing up to a total of $25,000 in super, but you will lose access until your preservation age.

My wife and I want to move out of our existing home and rent somewhere to live closer to work. Can we change the purpose of our first home to an investment, and do we then add the amount remaining on our mortgage to our calculations at tax time? Are there any implications we should be aware of before moving out of our home?

You can certainly rent out your former home, and all outgoings such as interest rates and repairs will be tax deductible and the rent will be assessable. It would be wise to get a depreciation report to maximise your tax deductions - there is a once-only cost of about $500 and it is fully tax-deductible. The interest and other costs can be claimed from the date it is available for rent. Keep in mind that you can be absent for up to six years without losing the capital gains tax exemption, as long as you don't treat any other property as your principal residence during that time.

I am 24 and single, with an income of $90,000. I have a rental property with $300,000 equity plus $50,000 in savings. I am keen to learn about ways to invest my money to ensure a prosperous future.

You are certainly doing better than most 24-year-olds. This is probably the perfect time to form a relationship with a good adviser who can help you to diversify into share-based investments. You could also discuss issues such as how your super is invested and personal insurance.



Is now a good time to buy a house?

The explainer

I am a full-time university student, graduating next year, planning to then go on to medical school. I have an 11-year-old at home, and should receive a divorce settlement of $200,000 soon. I'm trying to decide if now is a good time to buy somewhere to live, but hear that the housing bubble will soon burst. My father would act as guarantor on a mortgage for me. What would you suggest?

It's a tough decision, because renting is usually cheaper than buying, but most renters don't invest the money they save by choosing the renting option. In your situation it's probably better to buy sooner rather than later, but you are the person who has to do the legwork and research the market until you are convinced you have found a bargain. Your first step should be to talk to a lender and find out what kind of loan you would qualify for, and then decide if you can buy a suitable house in that price range.