Personal Finance
Newcastle Herald
Thursday May 22, 2008
QP eople seem to be losing faith in superannuation. I read many articles that use examples of people working and how it works for them, but I don't feel I have read one about "self-funded retirees" who do not have the income to put back into falling returns. I have withdrawn my super and it is currently in the bank earning a reasonable interest. I can only say, since leaving work, that super has left me wanting and the smarter ones are getting out!
A Unfortunately you have confused the entity that holds the asset with the asset itself. Superannuation is nothing more than a tool that lets you hold assets in a low-tax environment. If those assets are shares or property that fall in value, the outcome would be no different if they were held inside or outside the superannuation system.Q My Mum recently passed away and as a result I have inherited about $25,000 worth of shares. Mum bought some of these shares in 1987, some in 1997 and the most recent in 2003. In light of the market being so low what are the tax implications of selling shares when you inherit them. I was hoping to sell them next year (when and if the market improves). I was of the opinion that I had two years after receiving them to sell them without having to pay tax. If I am liable for CGT what rate and when would it be payable. A The two-year rule applies only to the residence of the deceased it certainly does not apply to the shares you have been left. You will be deemed to have acquired them at the same price as the deceased paid for them so you will need to find out the original cost and then work with your accountant to make sure you sell them at a time that is most suitable to yourself. CGT is calculated by adding the net gain to your income in the year of sale.Q My pensioner mother (62) is asset rich and cash poor. Her house is worth about $400,000 (no debt), and she lives solely off the pension. Rather than her resorting to a reverse mortgage I was considering purchasing part of her home as an investment. I have more than $200,000 in equity in my family home to borrow against. Can I kill two birds with one stone and implement a wealth- creating investment by borrowing say $100,000 or $150,000 to purchase part of her house and fix my mother's cash flow by increasing her income through interest? Is there a better way?A If you believe the house has good potential, and your proposed strategy will not cause problems with your siblings, it may be preferable to a reverse mortgage. However, if you are going to claim the outgoings as a tax deduction, you would need to ensure that your mother paid a fair market rent. You would also need to take advice to ensure that the sum you paid your mother did not affect her pension entitlements.Send your questions to noelwhit@gil.com.au. Readers should seek their own expert advice before making financial decisions.
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