Earning a break without a break from earnings

NOEL WHITTAKER

YOUR ADVICE

I AM a retired, single, 63-yearold woman and would like to take a special holiday costing $10,000. I have some money I could use in a super accumulation account as well as some good shares. Would I be better to withdraw the amount from the cash component of my super account or sell some of my shares?

Over the long haul, shares should produce better returns than cash, therefore I would prefer that you took the money from the cash component. Just bear in mind that it is prudent to have at least two years’ planned expenditure in the cash-type area, so make sure you still have liquid funds in case of emergencies. AFTER reading your article on the changes to transition to retirement pensions, I wonder what is the benefit for those who are aged between 56 to 60 if the income from the income stream is fully taxable less a 15 per cent rebate?

The benefits for everybody are access to your superannuation before you have retired if you wish, and the ability to take advantage of the difference between your marginal rate and the 15 per cent tax on contributions. If you earned $70,000 a year and took $10,000 in hand, you would lose $3450 in tax, but would lose only $1500 if it was contributed to super. The ability to withdraw the money as a transition to retirement pension would solve the problem for a person who wished to adopt the salarysacrifice strategy but whose budget would be unable to cope with the loss in gross salary of, say, $10,000.

Just keep in mind that a TTR income stream remains tax-free for those aged 60 and over. MY father is 95, a widower, and no longer able to live in the family home. He lives with us, and that is going very well. Rather than see the house fall into decline, he has decided to sell it, which we think is a good idea. He then said he wishes to share the proceeds equally among the four children before he dies, partly to stave off a potential problem with one of the four of us. Is he allowed to do this? What are the tax implications for him and us? I would estimate each share to be in the vicinity of $150,000-200,000.

If it has been his residence, it should be able to be sold free of capital gains tax. There is no gift duty in Australia, so the proceeds can be gifted as your father thinks fit. The major factor to consider is what will happen with Centrelink if he is on benefits – he will become a non-homeowner but the proceeds will be a deemed asset for five years, which will almost certainly mean he would lose all his benefits. Of course, if he is not receiving benefits, this is not an issue. It may be worthwhile talking to a solicitor about the way to frame the gifts – possibly it may be better to treat them as some kind of loan, but this would have implications for Centrelink in five years, as the asset would still exist for pension assessment purposes.