This was published 7 years ago
Should we use an inheritance to buy property in my spouse's name?
By George Cochrane
I am married and we have two teen boys, both at uni. Our house is paid off, worth about $850,000, and will suit us for many years. We have current savings of about $50,000. I retired from the Commonwealth public service, aged 54 and 11 months, nearly four years ago and receive a CSS pension of $58,000 a year. I also placed $185,000 into an allocated pension and receive $1250 a month tax free. I work three days a week and plan to do that until I reach age 60 in about 18 months, but I may work longer. The job pays $48,000 and I salary sacrifice $350 per week, my current balance in that fund is about $50,000. My partner left work when we started a family and has not worked for many years and as such has no personal income.
We have recently come into an inheritance of about $440,000 and are wondering what is the best use for this money. We would like to travel extensively over the next few years. My thoughts are to buy a duplex/villa around this part of the Gold Coast where body corporate fees are either non existent or very low and my research indicates we can buy something decent for about $370,000 which will return rental of about $350 per week. The remaining inheritance money would be earmarked for some house improvements and travel. The house would be purchased in my partner's name to take advantage of the tax-free threshold as she is not using this at the moment. Our intention would be to use the rental money for travel, together with my salary sacrificed money, and probably the usual health related costs that will occur as we get older. G.L.
The Gold Coast – a sunny place for property people.Credit: Wes Palmer - Skyepics Aerial Pho
Since you are receiving both a CSS pension and a salary, do you need the allocated pension as well? Being under 60, any taxable component is taxed at your marginal tax rate, albeit with a 15 per cent tax offset. I suggest leaving this in the accumulation stage until you really need the income.
I'm not an expert on Gold Coast property and, looking from the point of view of capital city prices, a villa for $370,000 paying a 4.9 per cent gross yield (usually reduced by around 1 per cent for outgoings such as rates, maintenance and repairs) sounds unusually good.
Just make sure there are no traps such as rising damp, concrete cancer, unpleasant neighbours etc. And remember that an annual trip to inspect the property is tax deductible.
I am 82 and have my superannuation with the subsidiary of a large company. Recently I switched investments to reduce my over-commitment to Australian shares. At the conclusion of that process I was requested to sign a document which read "I agree to release and indemnify (the trustee) for any loss or damage arising directly or indirectly as a result of or in connection with any such disruption or failure (in the systems)." Further, "I acknowledge that the internal and external systems used by (the trustee) are vulnerable to disruptions or failures which may result in my instructions or the instructions of my financial adviser not being executed or delayed according to the instructions given." It seems to me that I am being asked to give an indemnity for possible defects in systems over which I have no control. My adviser is pressing me to return to them the signed documents including the indemnity. I have written to the superannuation subsidiary requesting that the indemnity be deleted. I have not received a reply. Should I sign the document under protest and make a complaint to the Superannuation Complaints Tribunal? B.M.
It does sound a little silly to be asked to indemnify a large company if their system breaks down. It is often a lawyer's gambit to try something on and, if nobody objects, the gambit goes through. In your case, you are possibly the first client to bother reading the fine print, and it is quite possible no employee bothered reading a young lawyer's recent addition to the document.
Just put a pen through the clauses you don't like and initial alongside the alteration. If they object, rollover to another super fund. If the adviser objects, ask him whose side he is on.
By the way, I wouldn't be in any hurry to get out of Australian shares, the market seems to be zigzagging in an up trend.
I seek clarification to your response to GE in Sunday Money of 17 July, in connection with expected asset-test thresholds from January 2017. In your response you advise that the assets test will decrease the pension by $3 a fortnight for every $1000 above the new lower legislated threshold of $375,000 for home-owning couples. I have assumed that the lower legislated threshold is the combined assets of the couple and the reduction of $3 per $1000 over that threshold, applies to the pension of each partner. If my assumption is correct, as the current maximum basic pension rate per person is $600 in round figures, the estimated top threshold should be $575,000, not $823,000 as advised by you. Am I missing something – if so, I would be grateful if you could enlighten me? P.L.
The proposed new assets test measures the combined assets of a couple and determines a rate of pension by reducing the couples' full pension by $3 a fortnight for every $1000 of assets above the lower threshold.
The married pension granted is then divided in half and each member of the couple is paid separately. A spouse's 50 per cent of combined assets is not reduced by $3 per $1000 but by $1.50.
The lower thresholds to be introduced on January 1 were enshrined in law but the upper thresholds, at which the pension cuts out, were an estimate. Once pensions are indexed up again this September 20, the exact cutout levels from January 1 will be known.
If you have a question for George Cochrane, send it to Sunday Money, PO Box 3001, Tamarama, NSW, 2026. All questions answered. Helplines: Financial Ombudsman, 1300 780 808; Centrelink pensions, 13 23 00.