Beware self-managed super property buys

NOEL WHITTAKER

YOUR ADVICE

DO you have a view about purchasing investment property through a Self Managed Superannuation Fund?

I am not in favour of it. My view is that you maximise profits when buying property by borrowing as much as your budget can afford. Therefore, my recommendation is to keep your super fund for interest bearing accounts and shares and buy property outside the superannuation environment. I AM fully retired, 10 years younger than my husband, and am two years off reaching the preservation age for accessing my super.

I understand that my superannuation account is not considered by Centrelink until I reach the pension-eligible age. Will the withdrawals I make in the intervening years count as income and if yes, will they affect my husband’s eligibility?

Lump sum withdrawals from super are not regarded as income for Centrelink purposes but once the money leaves your super fund and is placed in your bank account it will start to be counted as an asset and be subject to deeming for income test purposes. I READ with interest your article on investing internationally. The difficulty is that funds specialising in international shares don’t pay predictable fully franked dividends and the returns are not predictable from a tax planning point of view.

Returns are also highly volatile, so that one fund may do ver y well one year, but poorly the year after.

I have units in the Vanguard International Index Share Fund (Hedged) and over 10 years the returns (capital growth) have been very modest – and there are no significant dividends/ distributions.

Personally, I prefer to invest in ASX listed companies which run the managed funds such as Magellan Financial Group (MFG), and Platinum Asset Management (PTM).

They at least pay fully franked dividends (with the obvious tax benefits) at a predictable time on a biannual basis.

That is particularly important for self-funded retirees such as myself.

Every investment has advantages as well as disadvantages. Just, keep in mind that the Australian sharemarket is just 2 per cent of world markets and by restricting yourself to Australia you are not taking advantage of what is available in the other 98 per cent. This is why international exposure should be an essential component of any balanced portfolio.

The challenge for investors is to work out which shares they could choose from the vast range that is available in that 98 per cent — this leaves most of them with a choice of an international index fund, or a managed fund which picks stocks. As you have pointed out, the index funds in most cases have not done as well as many of the actively managed international funds. Noel Whittaker is the author of Making Money Made Simple and other finance books. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au

Retirees on a tight income should be extra careful, and should check if gifts will affect their pension payments.

“If you are receiving the age pension there are restrictions on gifting,” Ms Cole said.

“You can give up to $10,000 a year but no more than $30,000 in a five-year period.”

Anything above those amounts is added back to your assets by Centrelink and can affect pension payments.

Centrelink’s gifting rules apply to both charity donations and pensioners giving money to children for things such as home deposit help.

Donations over $2 are tax deductible but only if the money goes to a group endorsed by the Australian Taxation Office as a deductible gift recipient (DGR) organisation. Most legitimate charities are DGRs.

A spokeswoman for Moneysmart.gov.au said the deduction must be claimed in your tax return for the financial year in which the donation was made.

“In some circumstances, you can elect to spread the tax deduction over five income years,” she said.

“You can check if an organisation is a DGR by visiting the Australian Business Register or phoning the ATO on 13 28 61.”

My recommendation is to keep your super fund for interest bearing accounts and shares and buy property outside the superannuation environment