Tweaking dad’s assets could lead to lift in pension

I AM in the process of selling my father’s home. At settlement, his total cash assets will be $919,000, of which $441,000 will be paid as a refundable residential accommodation deposit (RAD) to the aged-care provider. The cash balance will be $478,000, from which he will have to pay a meanstested daily care fee of about $14,490 per annum (maximum $64,000). Can you tell me what his pension per fortnight will be?

Rachel Lane from Aged Care Gurus explains: “Assuming the money in the bank is all of the assets, your dad’s age pension will be around $707 a fortnight and his means-tested care fee will be around $15,385 a year. It’s important to understand the direct link between the means test for your dad’s pension and his cost of care. Seek advice – a specialist financial planner could tweak the assets and increase your dad’s pension to $907 a fortnight, while reducing his means-tested care fee by around $2600 a year. I HAVE reached my $1.6 million limit for the super pension phase. I am still working. Can I still contribute after-tax money into my accumulation fund? Also, what happens to my employer contributions if those employer contributions cannot go into the accumulation fund?

You cannot contribute nonconcessional contributions to superannuation if your balance has reached $1.6 million.

However, you or your employer can continue to make concessional contributions irrespective of the balance in your superannuation fund, up to a limit of $25,000 a year from all sources. I’M 31 and expecting to make $250,000 from the sale of a property before the six-year capital gains tax exemption runs out. Would I be better off paying the money off my 3.88 per cent home loan or investing it in the share market?

If you pay the money off your home loan it would be earning a net 3.88 per cent – over the long-term a good share portfolio should do better than that. But remember, the name of the game is to maximise your tax-deductible debt and minimise your non-deductible debt, so your best strategy may be to pay the $250,000 off your home loan and then borrow back against the home to invest in shares.

This would give you the best of both worlds, with the interest on the loan to buy shares being fully tax deductible.

It appears, from your question, that you are retaining a home as your residence and selling one that is covered by the six-year capital gains tax exemption.

If that is the case, make sure you liaise with your accountant, because once you nominate the home you are selling as your residence, there is potential for some capital gains tax in the future on the one you are keeping.

‘Remember, the name of the game is to maximise your tax-deductible debt and minimise your non-deductible debt’