Ask Noel

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

I am healthy, but my husband has multiple health issues.

I had always understood that if one partner is still in their family home, he or she could safely assume that asset would never be considered to contribute to the cost of care in an aged-care facility. I am now wondering if this would still be the case from July 2014.

All our assets are in my name, because my husband was once bankrupt. However, I am shocked to discover that they will be treated as joint assets when the aged-care fees are being worked out. I have been quoted $2240 a month for my husband's full-time care. This, of course, includes his pension, but my contribution would be $1000 plus each month. On top of this, I would be responsible for my husband's medical, clothing and other personal costs. This has been an absolute shock to me and my family. Your comments would be appreciated.

The assessment of assets for aged-care purposes can seem difficult to understand, but it is essentially the same as it is for pension purposes - when dealing with a couple, the assets outside the home are considered on a 50/50 basis.

When one member of a couple moves into care, with the other remaining in the home, the home is exempt from the calculation of the person-entering-care's assets. The assessment of your pension would also change to that of a "couple separated by illness", which at the full rate is equal to double the single pension.

There are another set of rules that can enable you to have your assets and your husband's assets viewed separately. This is known as the separated and living apart rules. While these rules might seem attractive on the surface, very careful consideration needs to be given to the longer-term consequences, including the amount of pension you would each receive both now and in the future and your husband's cost of care. Specialist advice is essential if you are considering going down this road.

I am 63, single and have $150,000 in a portable super scheme. I have been receiving a disability pension from Centrelink for the past six years and do not have any other investments. A few years ago I withdrew $40,000 from my super, and recently withdrew a further $25,000. Do I have to pay tax on this $25,000?

As you are over 60, withdrawals should be tax-free.

Now that home loans are available at 5 to 6 per cent interest, if there are properties returning 8 per cent on investment, why don't more people borrow the money and use the rental income to pay off their mortgage? It all seems straightforward to an inexperienced investor - your rental income pays off the loan by itself. What's the catch? Surely there's more to it?

Properties tend to be high income/low growth; or low income/high growth. It's certainly better to have a positively geared property. Just make sure you choose one with good growth potential as well, if you can find it.

Just keep in mind that the interest rate cycle goes on and rates rise as well as fall - when doing your studies, make sure you factor in interest rate rises.

My wife is 60 and has substantial self-managed super funds (SMSF) in accumulation phase, which I manage as trustee. She does not work and has no income except for CBA dividends of $6000 a year. I am 75, retired, receiving a defined benefit pension of $33,000 and an age pension of $7000 a year. We own our home debt-free and would like to buy a block of land to downsize in a few years.

If $350,000 of the current super was converted into a pension, could that fund pay out this money tax-free and be used to buy land in our joint names?

If your wife does not work and has minimal income, it would make sense to place the SMSF in pension mode.

In any event, she could certainly withdraw $350,000 tax-free and recontribute it if funds become available before she turns 65.

Take advice, as there could be capital gains tax issues if the SMSF remains in accumulation mode and has to sell assets to pay out the lump sum.



Balancing baby and the mortgage

The explainer

My husband and I earn a combined salary of $160,000 a year. We have a $680,000 mortgage (principal and interest) on a property worth more than $1 million, with $400,000 in a 100 per cent offset account.

What is the best way to manage our mortgage? Should we switch to interest-only repayments so we have money available for other purposes? We want to start a family soon, when I will take 12 months' maternity leave before returning to part-time work.

I think you're perfectly set up now, with maximum flexibility, and theability to use part of the money in the offset account to help make the repayments if the budget is tight after you stop work.

Your net debt is only $280,000 - it would be great if you could make repayments of $3300 a month, which would have it paid off in about 10 years.



The numbers you need ... for Christmas

1843

... is the year that the first Christmas card was sent. It was made by John Horsley, in London.

40 per cent

... four in 10 Australians plan to spend less this Christmas than last year. The same survey last year by Mortgage Choice found that 52 per cent intended to spend less through the festive season.

41 per cent

... is the number of companies surveyed by Dun & Bradstreet which say Christmas trading is "significant" for them. But that leaves 59 per cent saying it isn't.

$1.5 billion

... is how much will be spent on toys and video games for Christmas stockings, according to economic forecasters IBISWorld.

150,000

... is how many letters Australia Post expects to deliver to Santa, whose address is North Pole, 9999.