The Advertiser - Real Estate - - House Hunter - AN­THONY K16E2ANE

PROP­ERTY in­vest­ments can pro­vide a great source of re­tire­ment in­come for many but there are plenty of po­ten­tial pit­falls on the money front. Max­imis­ing pen­sion in­come and min­imis­ing tax pay­ments are the key aims for pre-re­tirees and it’s wise to plan early to take ad­van­tage of the com­plex and con­fus­ing rules.

Pen­sion-wise, if you have one or more in­vest­ment prop­er­ties the chances are you’re go­ing to get a re­duced pen­sion or noth­ing at all. Cen­tre­link’s age pen­sion in­come test lets a cou­ple earn just $256 a fort­night from all in­come sources be­fore the pen­sion starts to get re­duced while its as­sets test is even tougher on prop­erty in­vestors.

For a homeowner cou­ple, pen­sion pay­ments start be­ing re­duced if their as­sets – not in­clud­ing their home but in­clud­ing ev­ery­thing else such as shares and in­vest­ment prop­er­ties – ex­ceed $258,000.

Pen­sion pay­ments stop com­pletely once as­sets ex­ceed $991,000.

One strat­egy used to max­imise pen­sion pay­ments in­volves switch­ing as­sets or cash into the su­per fund of the younger part­ner if they are un­der age 65. Su­per as­sets don’t count to­wards pen­sion as­set and in­come tests un­til a per­son reaches re­tire­ment age but this strat­egy can open up a sep­a­rate can of worms with cap­i­tal gains tax.

If you’re a se­ri­ous prop­erty in­vestor, you shouldn’t have to be se­ri­ous about get­ting an age pen­sion in re­tire­ment, which is re­ally just a safety net that pays about $500 a week to a cou­ple. Tax is the main area where good plan­ning can be ben­e­fi­cial.

I’ve pre­vi­ously writ­ten about own­ing res­i­den­tial prop­erty within a self-man­aged su­per fund, where you can pay zero tax on in­come, and im­por­tantly zero tax on cap­i­tal gains, once your su­per moves to the pen­sion­pay­ing phase when you re­tire. This has po­ten­tially mas­sive ben­e­fits. Imag­ine not hav­ing to pay cap­i­tal gains tax on a prop­erty you hold for 15 years on which you make a $500,000 profit.

How­ever, self-man­aged funds are a com­plex area and you need to make sure you get good in­de­pen­dent ad­vice. You also can­not trans­fer an ex­ist­ing prop­erty you own into a self-man­aged su­per fund.

There are sim­pler ways pre-re­tirees can get some tax ben­e­fits. Tim­ing is im­por­tant when lock­ing in gains and losses.

If you are sell­ing a prop­erty to raise cash for re­tire­ment liv­ing or to pump into su­per, look at off­set­ting a po­ten­tial cap­i­tal gains tax bill with things such as pre-pay­ing in­ter­est on other in­vest­ment loans, book­ing cap­i­tal losses on any poor-per­form­ing in­vest­ments such as shares, or mak­ing tax-de­ductible con­tri­bu­tions to su­per (but beware of the heavy penal­ties if you con­trib­ute too much).

Once again, good ad­vice is crit­i­cal. An­thony Keane is edi­tor of Your Money, which ap­pears in ev­ery Mon­day.

THE FU­TURE: Crows coach Neil Craig’s in­vest­ment prop­erty in Hal­i­fax St, Ade­laide.

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