Ask Noel

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

My partner and I are in our mid-50s with a combined income of $150,000 plus $300,000 in super. We are thinking of selling our home in the next five years, which should realise $350,000 profit. We would then pay the maximum allowable each year into super and invest the rest until we find a smaller property to live in on retirement. We would appreciate your comments on this strategy.

The problem with your proposed strategy is that it assumes your super will appreciate at a higher rate than your house would, and that there would be no capital gain in property between when you sell your current home and when you buy your retirement home. Also, you will have the cost of rent while you are in between residences.

You are the only person who can decide what growth rates you can work with but it seems to me that a simpler strategy may be to keep the property you have until you retire. You would then probably buy and sell on the same market. Another option, if you see prices starting to rise strongly in the area where you intend to buy, would be to buy the second property sooner rather than later and rent it out until it was time to move into it.

I inherited several parcels of shares when my wife passed away and would like to know their value either when I sell them, or include them in my will.

If the shares were acquired before September 1985, they will pass to you at the value at date of death. If they were acquired after that date, they will pass to you at the price that was paid for them. There will be no capital gains tax payable until you dispose of them, which means you can leave them to your beneficiaries and no CGT will be payable unless they dispose of them. Make sure you liaise with your accountant because if they need to be sold, it may be better to sell them in the name of the estate.

To find out the value of the shares you need to know how many holdings of each company you own and multiply that by the market price. You can get the market price for most listed companies from the daily papers or the ASX website.

My husband has recently been diagnosed with life-threatening cancer. We have been having many confronting discussions with his insurers about income protection, total and permanent disability (TPD), and death insurance. We have learnt there are different tax rates based on the time the TPD or death insurance is paid out. Could you please confirm this? We were expecting the sum insured to be the sum we received. We did not anticipate losing a substantial amount in tax. I will be a relatively young widow with two dependent children.

Where a super fund owns a TPD or death policy, the insurance proceeds are paid into the super fund. Hence any future payment of the insurance benefits takes the form of a superannuation benefit payment. Generally, the super benefits may be paid as a lump sum or super pension. Each option has financial planning implications including different tax implications depending on the reason for the payment.

Often these benefits may be paid out as a tax-free terminal medical condition payment, a tax-free lump-sum death benefit paid to the spouse (there may be tax implications if paid to someone other than the spouse), or paid as a taxable lump-sum disability benefit. Taxation of a lump-sum disability benefit could vary depending on the age of the member. Sometimes it might be beneficial to defer a payment until after attaining preservation age or age 60 where possible. A lump-sum death benefit may be increased by what is known as an anti-detriment payment. Taking a disability or death-benefit pension may be advantageous in some cases. Given the variables, including a considerable variation in potential tax, it would be prudent to get advice.



No harm in shares if you weigh risks

The explainer

We are self-funded retirees, in good health at 84, who rely on term deposits for income. We are not liable for income tax or eligible for the age pension. We have a $200,000 term deposit maturing soon and if re-invested will suffer a decrease of 2.5 per cent interest to about 4 per cent. So far we have avoided investing in shares, but note that when share dividends are quoted the yields are far more attractive than term deposits. Should we be looking at blue chip shares to maintain our income?

You must have substantial assets if you don't qualify for the age pension - accordingly I suggest you are in what we call the "custodian" stage, where your primary concern is living well while maintaining your estate intact for your beneficiaries. If that is the case, it would do no harm to start investing in shares if you are prepared to accept the fact that their values can bounce around and falls of 10 to 15 per cent are not uncommon. If my assumption is correct you should be involving your beneficiaries in any financial decisions you make.