How property can be used in your retirement
YOUR ADVICE
IF a retired couple has assets over $800,000, and part of those assets include an investment property and the property has a mortgage, does Centrelink take that loan debt off the total of investment assets for the purpose of assessing the age pension?
Provided the mortgage is over the investment asset itself it will be deducted from its value for Centrelink purposes.
MY wife and I are self-funded retirees. We own our home and an investment property which has been rented out for the past 20 years since purchase. In the near future, we intend to move into the investment property after renovation to make it our principal residence. If we bequeath both our pre-1985 present home and the new residence to our nondependent children on our demise, will they have to pay CGT on selling them? If CGT is applicable is there a CGT free period for them to sell these properties? Is there a qualifying period for us to live in the new residence after which the property can be sold CGT free by us?
Julia Hartman of Bantacs explains that if your heirs sell both properties within two years of your date of death no CGT will be payable.
If they take longer than two years CGT will only be payable on the difference between the selling price and the cost base. The cost base for both properties is the market value at your date of death, plus selling costs and anything else associated with the property, since your death, that they have not claimed a tax deduction for.
But this simple answer assumes both you and your wife die on the same day. Now, assuming that your wife outlives you, she will inherit half of the pre-1985 property from you with a cost base of the market value at the date of your death.
When your children inherit that property from your wife half of it will not be pre-1985 so there may be some CGT to pay. There is no period of time that you can live in your new home in order to be able to sell it CGT free in your lifetime. It will simply be a pro rata calculation going right back to when you originally purchased it. I AM 60 and not working (unemployed) – my husband 65 is retired and receives the full pension. If I start a transition to retirement pension (TTR) now from my super account, will the money I receive affect my husband’s pension payment?
If you were to start an income stream I suggest a normal account based pension, not a TTR. The reason is that since June 30 the TTR fund would pay tax at 15 per cent whereas your account-based pension fund would be tax-free.
However, your superannuation is sheltered from Centrelink only when it is in accumulation phase so starting an income stream could certainly affect your husband’s pension. Your best option would be to make lump sum withdrawals from your super as needed.
Noel Whittaker is the author of
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