Ask Noel

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

I earn $59,000 a year and try to pay $500 a fortnight off my $30,000 mortgage; I also have $43,000 in an offset account. I plan to upgrade my car later this year, which should cost $50,000. Is it better to pay off the mortgage from the offset account, use the remainder as a deposit on the new car, then take out a car loan for the balance, or use the offset account plus a loan for the car, and maintain the mortgage?

The car loan will almost certainly be at a higher rate of interest than the housing loan. The ideal situation would be to use the cash in the offset account to buy the car, and couple this with a redraw from the housing loan. If this is not possible, I would consider waiting until you have saved another $7000 before you purchase your desired vehicle.

I am 65, retired, and recently sold my home. I am now building a new home as an owner builder, but I'm not drawing a salary. Can I put $25,000 into super, and pay tax on the $25,000 while it is in super at a lower rate than the capital gains rate? How do I explain this to my super fund, and what are the time restrictions on making these contributions?

To contribute to superannuation after 65 you have to pass the work test, which requires you to do paid work for at least 40 hours over 30 consecutive days. Working as an owner builder does not qualify but if you have the skills to be an owner builder, I would imagine it wouldn't be too hard to get a temporary job as a handyman if your accountant believes you can save capital gains tax by making a deductible contribution. Bear in mind the concessional cap is now $35,000, not $25,000, for people aged 60 or over.

I am 58 and my wife is 52. What are the asset and income limits for us to obtain the age pension, and what is the age we would qualify?

Pensionable age for you is 66 if you were born between January 1954 and June 1955. For your wife it is 67. The current cutoff rates for the asset test are $1,092,000 for a home owner couple; for the income test the cutoff point is $77,400 a year. These figures will change by the time you reach pensionable age and you should be forming a relationship now with a good adviser who can help you optimise your affairs to maximise the pension. Under the current rules money in superannuation is not counted for Centrelink purposes until the owner reaches pensionable age - this may present an opportunity for you given your age differences.

I recently found a wealth management website which sounds like a good way to beat the term deposit rates. Can you explain how funds can beat the RBA interest rate by 1 per cent? I've read their PDS but can't understand what they do with the money, and how it is lower risk.

You should never invest in anything you don't understand - I suggest you ask their staff to explain the details, and if they can't I would look at other investments.

You may well find that the investment fund you are looking at is invested in high-yielding shares. While this may give you a higher return, it also leaves you at risk of a

capital loss if the market falls and you have to redeem the investment before it recovers.

My husband and I have a combined income of $220,000, no dependants, I am 48 and he is 45. Our total super is $298,000, and we have no other assets or investments. We owe $250,000 on our home, which is worth $910,000, and would like to renovate instead of relocating as we plan to live here until we retire in 15 years. We would then buy a unit mortgage free. Our renovation

will cost $300,000 and other properties in our area sell for over $1 million. Our debt would be $550,000 after renovation. Is it wise to renovate or should we pay off the mortgage - we estimate this would take five years.

I am in favour of renovating because it would cost you at least $100,000

to change homes - you would just need to satisfy yourself that you would not be overcapitalising the property.

Certainly, paying off the house would be a more conservative option, but you

would miss out on the extra lifestyle pleasure that the renovation would give.

I believe in the adage "bite off more than you can chew and chew like hell" so I think you should go for it.



Adding to shares a wiser investment

The explainer

I am a single parent in my 30s with one primary school child. I have recently finished paying off my flat, valued at $500,000, and have $30,000 in shares and $10,000 in managed funds. I earn $50,000 a year after tax and divert half my income to save for education and other costs. Should I save for an investment property or beef up my share portfolio?

You have done extremely well for a single parent on a relatively low income. My preference is to add to your share portfolio, as you are experienced in this area and already have the bulk of your assets in residential property. A further benefit of shares is that you can add to them in small amounts, and can make a part withdrawal if the need arises. You need a big chunk of capital to buy an investment property, and you can't sell the back steps if you need money.