A relation aged 25 is earning $150,000 a year in a construction job. He and his partner will be paying for a new house-and-land package next year. He asked me if he should be salary sacrificing to save tax. I told him I did not think that was wise in light of his proposed house purchase and all the costs associated with that. Your often mention salary sacrificing to superannuation rather than paying off a home loan, but am I correct in thinking this would only be applicable to somebody approaching retirement?
You are spot on. It would be crazy to be piling money into super at such a young age when they are planning to buy a house in the foreseeable future.
In any event, salary sacrifice into super is not a massive tax saver in his situation. His employer should already be paying $15,000 a year into super, which leaves only $12,500 available to be salary sacrificed.
The sum of $12,500 in his pay packet would lose tax of $4937, whereas money contributed to super would lose $1875. The tax saving of $3062 is relatively small.
It is a different matter entirely for someone aged 50 or more who wants to pour money into super, to make sure they retire with no mortgage.
My partner and I live in Melbourne and bought a house on the south coast of NSW for my daughter to live in, and for us to use for holidays. She owns 40 per cent of the house and we own 30 per cent each. I plan to leave my 30 per cent to my daughter in my will and my partner plans to leave his 30 per cent to his daughter. Will my daughter need to pay Capital Gains Tax (CGT) when I die? Would it be better to transfer my share to her before I die?
If you give it to her now, you would be liable for CGT.
However, if you leave your share to her in your will, no CGT would be payable and until she disposes of the property. This could be many years in the future.
Furthermore, provided the property continues to be her principal place of residence, the impact of CGT should reduce over time.
Your daughter should be thinking about ways to buy out your husband’s share, because the situation could be unsatisfactory if he dies and 30 per cent of the property is then owned by somebody else.
I am aged 60 and work full-time. I am trying to plan my finances for retirement in six years. I have recently come into an inheritance of $170,000 and am in a quandary as to where to invest it. I would like to be able to grow the funds but also to be able to access the money relatively easily after my retirement. The money is for travel and possible small renovations, as my husband’s defined-benefit super scheme generates payments of $2415 per fortnight, which covers our living expenses. We own our home and have a $300,000 mortgage on an investment property, valued at $850,000. I am thinking about either buying and renting another property – although would need to get a large loan – or perhaps buying shares or putting the money into my super, which is now just $60,000. I am also not sure about the tax implications of shares vs super. I welcome your comments on how best to invest the money.
I do not think taking out a large loan at your age is wise.
Super is the perfect place for you to invest the money, as accessibility would not not be an issue.
You have turned 60, which means you can withdraw money from your fund as soon as you retire from your job, or at age 65 – whichever is earliest.
The money could be contributed as a non-concessional contribution and there would be no tax on it or on any withdrawals.
Keep in mind that shares are a type of asset, whereas super is a vehicle that lets you hold assets in a low-tax area.
You could have each way bet by having your money in super, with a large part of the selected fund asset mix in shares.
I have been reading with interest your comments on what happens if a couple are on the age pension and one of them dies, leaving the surviving spouse over the single asset cut-off means test of just $593,000. Does replacing worn carpets and blinds come under allowable ways of spending money on renovations?
Yes, there are a number of allowable ways for a pensioner to spend money. These include renovations, replacing household items and travel.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Article Source: www.brisbanetimes.com.au
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