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MY HUSBAND is 55 next month and has $220,000 in one super fund as well as $96,000 in Defence Force super. At 55 we can either roll over, losing 15 per cent, or take a pension of $310 a fortnight for life. We've been told it would incur about $50 additional tax so we'd get $260 a fortnight. This pension will also increase with CPI and if my husband should pass away, I would get 67 per cent of the balance. At this stage we are seriously thinking of taking the pension for life. What would you recommend?

MY HUSBAND is 55 next month and has $220,000 in one super fund as well as $96,000 in Defence Force super. At 55 we can either roll over, losing 15 per cent, or take a pension of $310 a fortnight for life. We've been told it would incur about $50 additional tax so we'd get $260 a fortnight. This pension will also increase with CPI and if my husband should pass away, I would get 67 per cent of the balance. At this stage we are seriously thinking of taking the pension for life. What would you recommend?

You have to compare the tax implications of paying lump-sum tax now and investing in a way that suits you best, as opposed to taking a regular income by way of the pension, which is indexed for life. You should seek advice but factors will include your confidence in handling lump sums, your life expectancy and how important it is to leave money to your estate.

We have a self-managed super fund. If I purchased art works, where am I supposed to store them?

There were new rules effective from July 1 that created onerous conditions on the trustee. These included a prohibition on leasing the artwork to a related party, or storing it in the private residence of a related party. It is important to seek expert advice on this because there are many other new rules as well. However, if the artwork was purchased before July 1, then the trustee has a five-year transition period to comply with the new rule.

I am a single, divorced woman, 55 years old. I own my home a small flat in inner west Sydney worth $350,000. I have been given a non-repayable loan (really a gift) of $300,000 by my father. I have $40,000 in super and earn $550 a week after tax. What is the best way to invest the money? I am giving $15,000 to my adult children and am going to Europe next year. I will have $250,000 to invest. I am thinking about mortgaging my own flat and then buying two small flats one for rental income and one for capital growth. Is this a good strategy? I don't know much about investing but do not want to put my money into super, as I have no direct control over it.

The main purpose of super is to save tax so I doubt that super would be much use to a person in your tax bracket as money in super pays tax at 15 per cent on earnings from the first dollar earned. If you want control I agree that property might be appropriate for you but the outcome will depend on your ability at finding undervalued properties. If you can do this, success should be assured. Keep in mind that property is highly illiquid and needs to be held for a long time to make up for the purchase costs and other outgoings such as rates and maintenance. You should also seek advice because managed funds or direct shares may be a better option.

I have $26,000 in managed funds with one of the major banks. I'm now 60. If I withdraw the whole amount are there any tax implications? Should I roll it over in a pension?

Unless the money is in super, the tax position is the same as any other asset you will be liable for capital gains tax (CGT), if applicable, when you redeem the funds. Your accountant will be able to assist you. You can only commence a pension with super money so, if you wish to do this, you will first need to contribute the amount into super. Make sure you take advice before you act because there could be CGT on the redemption of the managed funds and heavy penalties if you exceed your super contribution caps.

Noel Whittaker AM is a co-founder of Whittaker Macnaught. Advice is general, readers should seek their own professional advice. Contact noel.whittaker@whittaker macnaught.com.au, follow him on twitter @noelwhittaker. Questions to:

Ask Noel, Money, GPO Box 2571, Qld, 4000, or see moneymanager.com.au

/ask-an-expert.


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