One should note that, in this industry, commissions have not been banned.
I am 72 and have been retired since age 56 but have consulted on a gradually reducing basis until this year. My wife is 62 and works part time, earning about $30,000. For 2018-19, my consulting income was $3,759, age pension $,2598 (paid on the asset test basis), UK pension $534 and Australian super pension $24,830. We have two properties in my name: 1. Our home of 17 years, which was rented out for eight years before moving in. We sold it on July 1 for $615,000. We paid $260,000, plus $8,500 in fees and have spent $40,000 on capital improvements. We have an estate agent’s “market appraisal” in 2009 up to $432,000. 2. An investment property valued at $550,000 with a mortgage of $214,000 which generates a small profit after interest and other expenses. My wife receives $6,515 from her UK pension and has $256,000 in Hesta Super. We paid a deposit of $57,000 on an apartment which will be our new home and should settle in October with a final payment of $510,000. The vendor is paying the stamp duty. 1. Will I be liable for Capital Gains Tax on the property we have sold and, if so, how will it be calculated? 2. Where should we best invest the proceeds of the sale during the time between settlement or our current home and settlement of the apartment? 3. What effect, if any, will the sale of the property have on my Australian pension? T.R.
Since Centrelink grants your age pension on the basis of the assets test, I estimate it is measuring assets of about $795,000.
It counts your combined assets and then grants you half the resulting married pension until your wife reaches her age pension age of 67. So, the extra $105,000 remaining after settling on your new apartment would be enough to push you assets past the upper threshold of $860,000 in assets for married homeowners (rises from September 20 due to indexation). If I’m correct, you will lose the that pension.
If a home is first rented and then you move in, then once you sell, the capital gain must be apportioned using the ratio of the number of days it was rented as a proportion of the total days it was owned. If we take whole years, the portion subject to capital gain would be 8/17ths.
So, if the value in 2009 is taken as $432,000 and if you carried out all improvements since then, your cost base would be roughly $472,000 and your capital gain ($615,000 minus $472,000) is $133,000. Of this, 8/17ths comes to $62,588 and, since you owned the property for more than 12 months, half, or $31,294, will be added to your taxable income, since the property was in your name alone.
With no consulting income or age pension and, say, $5,000 in rent, your tax in 2019-20 could come to about $4,275 if the UK pension is fully taxable.
It’s a sign of the times that the vendor is paying the stamp duty.
Property always involves large sums, with many possible deductions, and you should be going through a tax accountant.
I am a 57-year-old female, divorced and earning $75,000 part time. I own my home worth $1.3 million, have $545,000 in superannuation and $300,000 in a term deposit. I have two adult children and would like to help them to purchase their first homes, perhaps in the next five years. I am happy to continue working for the next five years and would consider working beyond that, if necessary. In retirement, I anticipate leading a modest to comfortable lifestyle. I would appreciate your view on how things look for my retirement, and what can I do to further assist with my plans? T.Y.
You seem to be using the Association of Super Funds “Retirement Standard,” which estimates a single person requires $27,800 a year for a modest single lifestyle or $43,600 for a “comfortable”. Let’s pick $43,000, unindexed with retirement at age 62.
Taking a woman’s statistical life expectancy of 62 plus 25 years, plus a further five if you are healthy, we can say you would you need about $900,000 in super at retirement, paying a tax-free income.
If you plan to give each child, say, $100,000 out of your term deposit, then add the rest to super.
If you then make the maximum $25,000 a year deductible contribution over the next five years you should just scrape through. But if you’re prepared to work longer, I would suggest you do so, just to give yourself a more comfortable retirement.
If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Australian Financial Complaints Authority, 1800 931 678; Centrelink pensions 13 23 00.