Your questions answered

Money has received hundreds of questions from readers about how to manage their personal finances, in all kinds of scenarios.

While it’s not possible to respond to every question, we’ve asked four experts to help us answer six questions that broadly cover the areas readers are most interested in. You might find other questions are answered through our regular feature articles; and if you’re seeking answers to JobKeeper eligibility, our website (moneymag.com.au) has more than 100 articles dedicated to Covid-19.

QMy wife and I have read articles sayings banks are unsafe at this time and if they get into trouble they will “bailin” people’s savings. We also read that the federal government’s $250,000 deposit guarantee won’t be enough. If our money was “bailed-in” to prop up banks, we’d be totally stuffed. It’s worrying for older generations. So where do we put our life savings?

Good question! First up, let’s remember that money in itself has no value. It is just something in which we have confidence, a medium of exchange. It certainly beats trading with sea shells or salt.

Some argue the government “promise” behind money is worthless, so they hold assets such as gold, which governments can’t print.

But we have some of the strongest banks on the planet and a government history of strongly supporting them. Believers in bank failure can certainly hold gold as an alternative or, in the extreme, bury cash in the backyard, as some do.

Personally, a diversified portfolio works for me, with my liquid funds in the bank. Paul Clitheroe

QI’m a single woman who’ll be 60 in July. I have about $88,000 in super and a $65,000 mortgage at 2.75%pa. I earn $66,500pa and am salary sacrificing $25 a week. I pay three times my required mortgage payment, so should I pull back a bit on that and put extra money into my super, particularly in the current market?

Including the Medicare levy you pay around 34.5% tax on your salary above $18,201. So you can take home 65.5 cents for each dollar you earn and pay down your mortgage. Or you can salary sacrifice. For each dollar you put into super, up to the maximum, you pay 15% tax, so you would have 85¢ in super. Now the question becomes 65.5¢ in the pocket or 85¢ in super?

Sure, paying down your mortgage is a secure option. It would depend on what super option you choose, and there is no certainty with your returns. But you would need to earn about 30% on your 65.5¢ to grow that to 85¢. This is your call, but I know what I would do … top up super. Keeping 85¢ in the dollar is a pretty good start. n Paul Clitheroe

QIf I claim a tax deduction for working from home, will there be any capital gains tax implications?

Generally, if you sell your family home there is no capital gains tax. However, you can partly lose access to this exemption if you use your home to earn income. If you’re working from home, however, you won’t lose access to the main residence exemption and your family home will still be CGT free. This applies if your normal place of work is somewhere else and you choose to, or are forced to, work from home.

Your main residence

exemption could be impacted if you run a business from home or if your home is your normal place of work. If that’s the case, you’ll lose the CGT exemption on the part of your home used in your business or job.

Mark Chapman

QI am involved in a three-person partnership (all actively involved in running the small business we own) operating under one ABN. We submit tax returns for the business as a whole and individual tax returns for each of us. We also each pay PAYG tax. I understand from the taxation office that only one JobKeeper payment of $1500 will be credited to our business account. How can we be paid as individual employees?

Many small businesses are eligible for JobKeeper on behalf of their owners. This includes sole traders, partnerships and businesses run through trusts. However, only one “eligible business participant” is able to get JobKeeper. So in the case of a partnership, only one partner can get the $1500 fortnightly payment. The various partners need to agree who that person will be. There is no obligation on the business to actually make the payment to that person. It can retain the money in the business, split it among the partners or pass on the whole payment to the selected partner.

To be paid as an employee, it is necessary to have been on the books as an employee at March 1, 2020. So it’s too late for a business to reorganise its affairs to make partners into employees now. If they did that, the ATO could apply anti-avoidance rules, which would force the business to repay JobKeeper payments. In addition, penalties could apply.

Mark Chapman

QI have a self-managed super fund and want to know what my options and opportunities are for taking pensions this year and next, especially under the Covid-19 temporary reduction of the minimum drawdown requirements?

SMSF members now have the option of still taking your minimum required pension, or you can elect to take up to a 50% reduction for this year and the same reduction next year.

Even if you want the same amount of money it may be an opportunity to structure the payment to your advantage. You could take the reduced minimum pension and the rest of your required income as a lump sum payment, called a “commutation” from your fund.

Any lump sum will either be a debit against your accumulation balance or against your pension with the highest taxable component. This would reduce your transfer balance cap account balance and may allow you to move more funds into the tax-exempt pension phase. This would help make the most of any good returns in a market recovery. You should review your options as soon as possible as all decisions have to be prospective and documented.

Liam Shorte

QShould I save my money or pay down my credit card?

You should always make paying off a credit card your number one priority. Why? Because you are paying interest of 7% to 18% while the lenders are offering 0% to 1% on savings accounts.

Reduce your spending to a bare minimum over the next six to 12 months and make it a priority to pay off your debt. Once your debt is paid off, you will be able to save your repayments every month.

Keep going until you have saved at least six months’ worth of living expenses. Everyone needs to learn to live on less than they earn, always. It is the only path to financial resilience.

Nicole Heales

Paul Clitheroe, Money founder and editorial adviser Mark Chapman, director of tax communications at H&R Block Liam Shorte, director and financial adviser, Verante Financial Planning Nicole Heales, principal and financial adviser at Nicole Heales Financial