Noel Whittaker -Oct 31, 2014
I have lived in my apartment for six years, and plan to rent it out later this year.
To get more Money more often, why not follow us on Twitter? We're @FairfaxMoney
As it was my principal place of residence for this length of time, would I be liable for capital gains tax when I sell? Once it is rented, can I claim depreciation and other maintenance costs as a tax deduction?
Unless the property was rented by you until you moved in, it will be exempt from capital gains tax for up to six years from when you move out and it becomes available for rent. The proviso is that you don't claim any other property as your principal place of residence in that time. All ongoing costs, such as interest, rates and maintenance will be tax deductible – the rents will be assessable.
I am 80 and hold $40,000 in a super fund accumulation account, where the returns have been much better than bank interest. Is there any benefit in moving these funds to a pension account, which is already paying enough for our needs, and where it would increase our assessable income with Centrelink? On another subject, is an online account the best short term option for holding cash from a recent property sale, where the funds must be easily accessible?
If $40,000 is all you have in superannuation, I wonder if the costs of maintaining it there are worth it. Remember, superannuation funds pay 15 per cent tax from the first dollar earned whereas pension funds pay zero tax. Of course, the best strategy for you depends on the extent of your other assets so I suggest you ask a financial adviser to run the numbers for you. I agree that an online savings account is your best short-term option.
I am 49, single and have approximately $180,000 in savings, $25,000 in shares, two super funds, no debt but am renting. My salary is $90,000 and my youngest child is about to start university. I have been thinking about buying an investment property (housing), but feel that a margin loan directed towards managed funds would give me greater flexibility, and returns vs. risk, at the moment. What is your opinion?
My preference is for a quality share trust because you have the ability to buy and sell whenever you wish and do not have the worry of vacancies and damage and the costs of rates and insurance. Obviously you will need to talk to an advisor but you have sufficient cash available to have a small loan to valuation ratio if your borrow conservatively – this will make margin calls
extremely unlikely. Also, if possible, you should think about amalgamating your two super funds into one to save annual fees. Just bear in mind you should have a ten year time frame in mind when investing in share based investments.
I am fully retired, 10 years younger than my husband, and am two years off reaching the preservation age for accessing my super. I understand that my superannuation account is not considered by Centrelink until I reach the pension-eligible age. Will the withdrawals I make in the intervening years count as income and if yes, will they affect my husband's eligibility?
Your husband's eligibility should not be affected as lump sum withdrawals from super are not regarded as income for Centrelink purposes – but once the money leaves your super fund and is placed in your bank account it will start to be counted as an asset and be subject to deeming for income test purposes.
I earn $259,000 and my employer pays the maximum allowable super guarantee, so I can't make additional contributions. Is there any way to reduce my taxable income? I am married with two children, and pay the Medicare levy.
The reality is that there are very few tax breaks left for PAYG earners except salary sacrificing to super. You could certainly put more assets to work for you by borrowing for investment, and this is a good wealth building strategy. However, it's not going to save you much tax because the income from the investment would offset the interest payable.
I have a $800,000 equity in my home. What would be the best way to unlock it to receive a decent yearly return?
The only way to access the equity in your home is to borrow against it, or try to sell a part share of the property. Obviously, selling is not a good option which leaves borrowing, and if you do borrow you should understand that all the equity in the world is useless unless you have the income to service any loan you take out. Furthermore, the interest would bite into any earnings that the investment you buy would produce. If you are a senior you could talk to your bank about borrowing by way of a reverse mortgage. These loans require no repayment of principal or interest but you need to keep in mind that the debt will double every eight years, therefore the loan should be small and delayed for as long as possible.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice before making decisions. Email: firstname.lastname@example.org .