Banking on smart way to invest small sum of money
MY husband earns $100,000 a year, however, my income is very low due to illness.
My mother helped us to buy a house, which is now worth around $1 million. We pay $400 a week to her, the house is in our names, and when she dies we will not need to sell.
We have $28,000 to invest at low risk.
Do you think we should contribute this money to super or invest elsewhere?
It really depends what you mean by risk, because there is always a risk/return trade-off.
You could leave it in the bank, where there is no chance of a market fall, but where it will be eroded by inflation, or you could place it into an index fund which tracks the All Ords index, where by definition it cannot go broke.
The fund would pay you an income better than 4 per cent franked, but you would have to be comfortable on the days when the market was falling.
The same comments apply whether the money is held inside or outside super, because superannuation is nothing more than a vehicle that will perform in line with the assets it holds. I RECEIVE a very small part Age Pension and my wife receives nil, being below Age Pension age.
We are assets tested by Centrelink largely upon my additional allocated pension account, our bank accounts and the modest apartment owned by my wife in Shanghai. My wife is trying to sell her apartment but under Chinese law she is not permitted to transfer more than $50,000 per year out of China.
Although this doesn’t make the apartment a totally unrealisable asset, it would appear that Centrelink is making a less than reasonable assessment in our circumstances. Does Centrelink have some clause that acknowledges such a situation?
Centrelink advises that the Social Security Act defines an asset as any possession, including overseas-held property. Assets are assessed at their net market value, but the policy can also allow for an asset to be assessed at less than its face value, if it cannot be realised or borrowed against.
When calculating assets under the general means test, it’s assumed they can be used to support the customer either by realising assets or generating an income from them. When this isn’t the case, they may apply Assets Hardship provisions using a different test that excludes assets that are not readily accessible. These provisions are only applied to customers who would otherwise be unable to support themselves, and they can only be accessed by those with readily available funds of less than the annual maximum rate of payment that they receive.
In this case, neither legislation nor policy allows for her to be assessed at less than face value.
As well, it appears that they would not be payable under the Assets Hardship provisions, as Centrelink wouldn’t consider being permitted to transfer only $50,000 from China each year as “severely limited”. Noel Whittaker is the author of
and other finance books. His advice is general in nature and readers should seek professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au