Noel Whittaker answers your money questions

Should James put his money in super or keep it invested in property?

Hand writing Where to invest

James is confused as to whether his money is better in super or property when the time comes to claim an Age Pension, so finance guru Noel Whittaker points him in the right direction.

Q.  James

I have an investment property that I rent out and I’m wondering whether I should sell it and put the proceeds into super? I know that Centrelink will assess the property as an asset but once I reach Age Pension age, any money in super won't be. Is this correct? I think I would have a profit of about $250,000.

A. The problem with doing this is that the legislation is currently being debated and is unclear. Keep in mind the intention is for a lifetime cap of $500,000 for non-concessional contributions backdated 10 years. Also, you have got your facts backwards – money in super is not counted until you reach pensionable age but then does count. I think at this stage in your life you should be to meet a good advisor with the aim of optimising your financial affairs. It may be possible to reduce the capital gain on the sale of the investment property if you are eligible to make a tax-deductible contribution to super.

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.

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    To make a comment, please register or login
    19th Sep 2016
    Advisors are telling people your money is ok in super as centrelink can't touch it.
    They are giving people bad advise.
    If you want to know get in contact with centrelink.
    19th Sep 2016
    It's a bet each way Noel. The dilemma is that the goal posts move....and may move further in the future.
    As one cannot trust governments wanting to get their greedy hands on some of the superannuation nest egg property may potentially be a better bet. Even here one has to consider estate duties (a Death Tax) coming back. It will matter not that Australia is a very highly taxed country already when elected officials want more and more money to waste. That's when you will get bipartisan support.
    19th Sep 2016
    Noel, I just received my Private Super Fund statement. The bottom line was unpleasant but it appears it has done a turn around in the last few months. What alarmed me most was the "Cash and Term Deposit" portion. When I queried why it was 1.95% when the banks are offering 3% this was what I was told.
    1. "Cash And Term Deposits" is not actually what it says it is, its actually investments.
    2. The Super fund has to pay 15% company tax
    3. They purchase Cash and Term Deposits from the bank at a lower rate than the bank offers their own customers.
    4. The super fund also charge fees.
    5. Because they don't know how much people will withdraw in anyone year the super fund can't invest long term.
    Now you can't imagine just quite how angry I am at the moment. It takes no skill to invest in Cash and Term Deposit. The Super Funds have enough technology to personalise my Cash and Term Deposit term and percentage rate at my request just as the banks do. How can they justify a percentage fee on one bulk transaction? "Excuse me bank, what is your lowest rate you can offer clients, they don't care just take their $1b.
    How can they justify company tax on my earning when I had a negative return. They get taxed on their fees so that should come out of their kitty not mine.
    Also if I set up a proportional amount when I was 40 and I have no access to it until I am over 60 unless something seriously untoward happens to me them I would have thought that would have afforded the super fund a very high guarantee of investment. Far better than a volatile stock market share portfolio.
    I just feel this is time for a letter to Parliament or the ACCC. Any tips on where I should begin?
    I am not sure how everyone else's super funds are managed but there is absolutely no benefit in having any money whatsoever in a "cash and term deposit" portion of superannuation. There is no tax benefit once you have retired.
    19th Sep 2016
    You might need to either change funds or set up your own SMSF if your balance is large enough to justify the extra fees. You make a good case for buying a house, or rather having bought one when they were much cheaper.
    Don't expect anything useful from the ACCC, ASIC or any of the other so called regulators. These organisations are similar to local councils: they employ people for anything other than policing bad operators and crooks and the public pays.
    19th Sep 2016
    Find another fund, research exactly what their investments and fees are. I was being charged ongoing management fees, phoned them and they stopped them.
    Old Geezer
    19th Sep 2016
    Please update your answer Noel. The lifetime cap on non-concessional super has been canned.

    I'd be buying fully franked shares over property or super these days.
    19th Sep 2016
    Fully franked shares outside SMSF ?
    If retired wouldn't it be better to have shares inside SMSF, then all the franking credits would be refunded so in theory individuals could earn 6% plus on their investments.
    Just a thought.
    Old Geezer
    19th Sep 2016
    Why as you can earn about $30,000 a year before you pay any tax? Your franking credits are refunded just like a SMSF.
    Old Geezer
    19th Sep 2016
    20th Sep 2016
    You can earn $30k before paying tax but to my understanding that is for seniors / pensioners only. Depending upon individuals circumstances (age, other income etc) options such as having shares in Smsf may be a good option.

    Again, just a thought.
    5th Oct 2016
    Hi Everyone, this link maybe of interest as it allows comparing of lots of super funds whether industry ones etc; plus outside of super
    this is link for the top quartile of funds but also has tool for comparing various funds
    link for comparing funds is near top in the middle and includes charting etc

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