I’m about to get a property settlement of $400-$500K, which is part of the proceeds of the family home and some of my ex’s super.
Is it better request most of the settlement as super, set up an SMSF and buy an investment property for the fund? Or is better to get most of the money as cash and buy an investment property so I use the rental income to help pay my rent? (I need to stay in Sydney until end of 2018 so my children can finish high school).
I’m 55 and have only worked in part time low paid jobs so I could be around for the children. My earning capacity isn’t very high and I need rental income more now than I will in 10 years, when I will probably get an inheritance.
However I’m worried about how much tax I would have to pay on the rental income, and also how it would affect my Centrelink payments if I own an investment property (I’m on Carer Payment and will probably go on Austudy next year when my son turns 16).
Any advice would be much appreciated.
Sit down with an independent financial planner about this situation – you don’t want to mess this up as depending on the path you take, you can end up with VERY different results. Being 55 super may be a prudent place to put the funds, A planner + accountant will be able to help you work out where the funds can be placed most effectively for your short, medium and long term needs.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Rather than purchasing a rental property why not consider a purchase an owner occupied property and then borrow to invest.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
What @terryw said – if possible buy a place for yourself debt free, which avoids paying out rent and gives you some life stability after a big change, then set up 80% loan with offset (talk to the brokers) and set some aside as buffer, use the rest as deposits, get new investment loans on any properties you buy and it should all be tax deductible. If you get the purchase mix right (ie invest in areas with a blend of cash flow and growth) you might not lose your entitlements.
BuyersAgent | Precium
http://www.precium.com.au
Email Me | Phone MeSouth Coast NSW Independent Buyers Agent - Wollongong to Batemans Bay and Regional NSW. DOWNLOAD OUR FREE 14 POINT PROPERTY BUYER'S CHEATSHEET to avoid painful mistakes at precium.com.au
At 55 years of age i am not sure i would be borrowing in your own personal name.
You could look to make a non concessional contribution to your Super fund and then look at a transition to retirement pension.
Doesn’t mean you have to stop work or cease earning an income and may still be able to retain your Centrelink benefits.
A good independent Financial Planner should be able to guide you around this area of Super legislation.
Cheers
Yours in Finance
0-40 Properties in a decade. Ask me how.Richard Taylor | Australia's leading private lender
Thanks for all the advice.
I need to stay in Sydney for the next 3 years so my children can finish their education, but am unable to afford a property in Sydney. So my current thinking is to buy an affordable property in the country – at least I could get some rent from it and then I could move to it in 3 year’s time.
Thanks for all the advice.
I need to stay in Sydney for the next 3 years so my children can finish their education, but am unable to afford a property in Sydney. So my current thinking is to buy an affordable property in the country – at least I could get some rent from it and then I could move to it in 3 year’s time.Ah ok, that changes things.
Fair enough reasoning. The question now becomes where do you want to live in 3 years time? Just make sure you balance the purchase with buying a sensible investment yield along with emotional desire for a lovely home. They don’t always line up together. Is it rural regional or coastal you are looking for?
BuyersAgent | Precium
http://www.precium.com.au
Email Me | Phone MeSouth Coast NSW Independent Buyers Agent - Wollongong to Batemans Bay and Regional NSW. DOWNLOAD OUR FREE 14 POINT PROPERTY BUYER'S CHEATSHEET to avoid painful mistakes at precium.com.au
I agree with Richard. Given the proximity to retirement, the rental returns coming from the properties will have a much lower income tax applied when you are retired. Presently the tax is zero. Compared to outside super which will be the marginal rate.
I don’t think the superannuation drawdown tax rate will remain at zero for pension phase, but it is reasonable to presume it’ll always be lower than the marginal rate outside of super.
It’s about maximizing your net returns in pension phase… not giving some of it away in unnecessary taxes.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Of course as I mentioned you don’t have to wait until Pension age.
Within a year you could commence a TRIP and you could then salary sacrifice an amount and draw from the TRIP the same amount with the 15% pension offset. The earnings in the TRIP part of the Super Fund will be exempt from Tax from day 1.
Cheers
Yours in Finance
0-40 properties in a decade. Ask me how.Richard Taylor | Australia's leading private lender
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