The Commonwealth Seniors Health Care Card (CSHC) is of great value to us self-funded retirees. We have more than $1.6 million each in superannuation and are concerned that we will lose the grandfathering provisions when we are required to adjust our arrangements on June 30. Can you throw any light on this matter?
A Treasury spokesperson assures me that existing CSHC holders with current retirement income balances in an account based pension of more than $1.6 million should not lose their grandfathered eligibility for the CSHC. Eligibility for the CSHC is retained as long as the grandfathered product is retained. However, if an individual fully commuted the grandfathered income stream (thereby ceasing the product), eligibility for the CHSC may be lost. This is a matter of some complexity and anybody who feels they may be affected should seek expert advice.
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My wife and I are self-funded retirees. We own our home and an investment property which has been rented out for the last 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-1983 present home and the new residence to our non-dependent children on our demise, will they have to pay capital gains tax (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 life time. 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 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 after 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.
I read your articles with great interest. However, I am often left wondering what assumptions underpin your projections. In particular, do you envisage spending down all capital over retirement or leaving it intact?
How much anybody needs for retirement is extremely difficult to work out because it depends on such factors as the state of their health, how much is spent on dining out and travelling, how long they live, and how often the kids put their hand out for help. To make it more complicated, the age pension increases as the assets run down. I recommend a targeted capital sum of 14 times your expected expenditure but this is a very rough guide. This is why you should be guided by your adviser, and at least every year have a meeting to see if you need to revise your strategies.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: asknoel@fairfaxmedia.com.au.