Noel Whittaker's  Questions & Answers - page 42 17-8-08: Question: I was pondering my impending contribution to super from my after-tax income for the co-contribution, and its subsequent incarceration for 21 years. If I get into financial trouble in the future and need to apply for a portion of my super to be released (to save my house, etc), would there be any tax payable on the withdrawal, given that I have contributed about $5000 from my after-tax income over the past few years? And if I pay no tax in the year of the withdrawal, is there still a penalty tax payable? Answer: The tax payable if any, would depend on the components, but you need to understand that the Government has deliberately made it difficult to access your super before your preservation age. For example, one condition is that you need to be in receipt of government benefits for at least 39 weeks. Question: A group of friends and I have started up a lotto syndicate. Each person contributes the same each week and the entry is submitted using a registration card which, of course, is in the name of only one person. We have been informed that, should we ever win an amount which would involve each individual receiving $10,000 or more, then as we are friends and not relatives gift tax would be payable. Is this the case and, if so, how can we avoid this situation should we ever be lucky enough to have a big win? Is it sufficient to keep a record of the amount each person has paid into the syndicate? Answer: There is no gift duty in Australia and windfall gains such as lotto winnings are tax-free. Obviously you have nothing to fear from the tax office but it is important to keep good records of who invests in the syndicate to prevent costly litigation if you have a big win. Question: I have an investment property in another state. If I sell and defer the capital gains tax and buy another investment property in my current state, then in six months' time I move into it and live there do I still have to pay the capital gain tax? Answer: You cannot defer capital gains tax in Australia by rolling the gains into another investment property. Once the sale contract is signed, CGT is triggered. Take advice before you sign any contracts because it may be possible to reduce the CGT if you are in a position to make a large tax deductible contribution to superannuation. Question: I have just sold my home and will make a profit of $50,000. As I have debts of $35,000 should I put the money in a bank and borrow against it to pay off all loans with higher interest rates? I am on a fixed income. Answer: Providing you are disciplined the best strategy is to use the money to pay the loans off, however it is most important that you bank the loan repayments you are now making that will cease when the loans are paid off. Otherwise your financial situation will slowly but surely deteriorate. --------------------------------------------------------------------------------------------------------------------------------------------------------- 27-8-08: Question: My parents have five investment properties -each in the name of one or the other of my parents. They also have a family trust. What are the benefits and/or disadvantages of having the properties in the name of a family trust? If held in trust, would we children be able to use the equity to buy further properties and increase the portfolio? Answer: There could be heavy costs in stamp duty and tax if they moved the properties now to a trust, and there may be few tax benefits if they are retired on an average income. If your parents and family members agree, it is possible to put up one or more of the properties as security for loans to buy more property. Question: My husband retired in February 2008. He may come into some money soon from his mother's estate and would like to hold off setting up his pension until this happens. I have been told that all monies for a self-funded pension have to be set up in the financial year you retired. If so, is there any way around it? Answer: I assume you are talking about contributions to super. Be aware your husband cannot contribute once he is aged 65 unless he works 40 hours in 30 consecutive days. A person cannot contribute to super past age 75 even if they pass the work test. He can start an allocated pension whenever he wishes, but cannot add to it. However, if he is eligible to contribute to super, he can start a new fund and eventually draw a pension from that too. Question: We have a rental property with a mortgage of $148,000. We want to buy another house to live in as we are renting ourselves. I am not sure if we can take out another loan or will it be better to sell our rental property? We are on one wage of about $70,000 gross. Answer: Do the sums with your lender, but I doubt you could afford another property on $70,000 a year. Make sure you find out how much capital gains tax you will be liable for if you sell the investment property, and also ask your bank if there will be any exit fees when you pay out the loan. Question: I am planning to retire in October. I have a small amount of super, more than $100,000, but I am worried that it will be eroded by the current financial situation. Should I remove my super and put it in the bank on a fixed-interest bearing deposit? Answer: If your superannuation is no more than $100,000 you may find that you would be paying no extra tax if you withdraw the balance and place the money in a high-interest bank account. --------------------------------------------------------------------------------------------------------------------------------------------------------- 1-9-08: Question: I am 25, earn $3,190 a month and have got myself into a lot of debt. I have a $30,000 personal loan and two credit cards with $11,000 outstanding. I just started a second job, which will let me put $300 a month towards my debt. I also want to save $2,000 and start investing. Would shares be the best way to invest or would it be better to wait till I'm debt free? Answer: Congratulations on taking steps to get yourself back on track. I suggest you focus all your endeavours on paying off your debts before you start an investment program, so put any spare money into repaying the smallest credit card debt. When that is paid off, use the money no longer needed for its repayments to attack the next smallest debt. Question: I have about $40,000 in my online savings account paying 8.25 per cent interest. I'm planning to withdraw $20,000 to use for a three-year working holiday, and will leave the other $20,000 as savings or investment for a house deposit when I return. What is the best way to maximise my savings over three years? Answer: For a term like three years you can't go past the online interest-bearing accounts you are using now. Your money is secure and there are no entry or exit fees. Question: My wife and I have a rental property. I have heard that salary sacrificing into super may be a better investment alternative. I know it depends a lot on the actual rental property and different super schemes but in general terms would you agree? Answer: Your best strategy depends on your age. If you are under 40, the lack of access makes salary sacrifice to super less attractive, but if you are 50 or over you should go for it as hard as you can. This is because salary sacrificed contributions lose just 15 per cent, whereas money taken in your pay packet loses 31.5 per cent or more. By keeping the investment loan on an interest-only basis, you maximise your tax breaks. By salary sacrificing to super, you build up funds in a highly tax-effective environment. --------------------------------------------------------------------------------------------------------------------------------------------------------- Back to: HOME       Back to: Finance        Back to: Whittaker (41)       Forward to: Whittaker (43)