Warning bells are ringing

Q

My sister and I have jointly inherited a small unit in central Sydney from our grandmother. She bought it in the 1970s. It has been valued at $575,000 and earns about $1200 a month in rent. My sister and I have completely different financial circumstances. I am a fairly senior public servant in a defined benefit super scheme. She has had health issues that are likely to be ongoing and receives a disability pension. I have three kids; at this stage she has none. She owns her own house outright; I have a substantial mortgage. We are in our mid-40s.

We are inclined to keep the unit as we think central Sydney property is a good investment. We were wondering if setting up a joint self-managed super fund and transferring the unit title to it could be an option. The benefit would be reduced tax payable on the rent for me and my sister’s disability pension wouldn’t be impacted. We would reinvest the rent for our future retirement. Is this an option for us?

As the robot on Lost in Space was fond of saying, “danger, danger”. This is a seriously complex question, with a potentially sophisticated idea. So here the robot’s words are ringing out to me.

The answer needs you both to meet with a well-qualified, fee-charging adviser. Your situations are so different and I hear alarm bells everywhere.

About all I can say without potentially misleading you is that I do agree about the property. Central Sydney is a great place to own property with a long-term view, so unless it had particular issues I would also try to hold it.

As for tax and legal structures, please seek out a professional adviser.