Is super an issue if I go back to work?


Q I have been retired for a couple of years, and am thinking of getting some part-time work. We have $190,000 in our pension fund and own our home.

If I do get a job, would I be able to create another super account, put some of my earnings into it, and simply roll it over into my super account at some stage?

A You could certainly do that if you are under 75 and pass the work test, but ask your accountant to do the sums. Superannuation funds pay tax at 15 per cent a year on earnings from the first dollar – you may find that money held in your name is entirely tax-free.

Q In a recent article about pension changes, you said grandfathering rules will not apply to those who already have an allocated pension “if people change products”. Does this mean that if I currently have an allocated pension, but want to change my pension to another provider before January 1, 2015, I will lose the protection of the grandfathering rules, but will fall under the new rules applicable from January 1, 2015?

A The timing is critical, so I suggest you make any changes to your situation as early as possible. If you satisfy the following criteria immediately prior to January 1, 2015, the account-based pension will be grandfathered.

  • You have an account-based pension.
  • You receive a qualifying government income support payment.
  • You continue to receive a qualifying government income support payment.

If you change income stream providers, and the new income stream is commenced prior to January 1, 2015, and the additional criteria above is satisfied, the income stream will be grandfathered. If you change income streams and the new account based pension is not begun until after January 1, 2015, it will fail to meet the above criteria and will be deemed from January 1, 2015.

Q I am 62, retired from full-time work, and withdraw the minimum 4 per cent from my self-managed super fund of $5000 a month. I spend $4000 a month and have $1000 left over. Is it possible to return this $1000 back into my SMSF, and how do I arrange this? I can’t put the $1000 into my wife’s SMSF as she would have exhausted her $540,000 in non concessional contributions this year.

A You cannot contribute to a fund in pension mode, but you could certainly open an accumulation account within your own SMSF and contribute excess funds to that account. Make sure you take advice as there are heavy penalties for getting it wrong.

Q My partner and I are in our early 40s. I have an investment property in Sydney worth $900,000, with $450,000 owing on an interest-only loan. We would like to buy a unit together for $700,000 as we currently rent and are looking at selling my house. Everyone tells me not to sell the house, but I can’t see how it is possible to keep it as well as buying a place to live in. My partner has no assets but will be able to pay half the new mortgage. Our combined annual income is $110,000. What do you think?

A I agree that you would have great difficulty in making the payments on a mortgage of $700,000 when your combined income is $110,000, but if you feel the house has good potential you could keep it and simply rent a unit. Renting is almost cheaper than owning and the property you own would ensure you had a substantial interest in the Sydney property market. Iif you sell, there will be transaction costs and a possible capital gains tax.

Q My parents and I own a rental unit, with my share being one quarter. They are thinking of selling the unit and I am considering buying out their share. I would need to take out a mortgage, but I should be able to manage the repayments with the rental income. What is the best way for us to arrange to purchase of my parents’ share of the property?

A First, liaise with your accountant because there may be some capital gains tax liability for your parents and there will be stamp duty for you. Irrespective of contract price, it will be deemed for tax purposes to have passed at current market value. Talk to a lender about the best way to structure the loan.

Q We have an investment property worth $720,000 we bought three years ago for $500,000. For the first two years we were living in this property and now have it rented out. We are now renting, have bought land and plan to start building soon. If we sell our city property and use the proceeds to help pay for our new home or another investment property, do we pay capital gains tax?

A Make sure you talk to your accountant before signing any contracts but based on the information you have given you should be within the six-year capital gains tax exemption period provided you lived in the house before you rented it out and have not claimed any other property as your principal residence since.

from The Sydney Morning Herald here: