Using super downsizing provision may not be worthwhile

My wife and I are 72 and 73 years, respectively. We own our house worth about $2.5 million, almost mortgage free. We also have two investment properties in which we have equity of $800,000. I have $520,000.00 in a superannuation account in pension mode. My wife has about $50,000.00 in a super account in accumulation mode. We are both professionals, working full time and earn about $325,000.00 year. Considering our age, is it advisable for each of us to withdraw money out of our home loan account and invest $100,000 each into our super account as an after-tax contribution. This investment will go into our pension accounts and the income thus will be tax free. Considering our age, we can only do this for the next couple of years.

It is certainly possible to do it, except that your own contribution will need to go to a separate accumulation account because a pension fund cannot accept contributions. Also, keep in mind the interest on the loan will not be tax deductible.

I assume you are contributing the maximum concessional contribution allowable of $25,000 each a year. This may well be coming via your employer in view of your income. Just keep in mind that total concessional contributions from all sources cannot exceed $25,000 a year.

I am turning 60 with $200,000 in super and $100,000 in savings. I own my own home worth $700,000 and work part time earning $64,000 a year. Should I salary sacrifice to super and, if so, how much please? Alternatively, would I be better to make a lump sum payment?

Salary sacrifice is certainly a worthwhile option because such contributions lose just 15% contributions tax, whereas money taken in hand would lose 34.5% for a person in your tax bracket.

Your employer may be contributing about $6000 a year, so keep in mind that total contributions, including the employer contribution, cannot exceed $25,000 a year. Also, since the rules changed last year, you don’t need to salary sacrifice — you could simply make the contribution and claim a tax deduction.

I am 38 and have $300,000 in my wife’s online saving account. We own the apartment where we live, current value $675,000. We have a mortgage of $190,000 on this property, which is offset by $190,000 in offset account. Thus we are paying zero interest. We are looking to buy a house for investment purposes for, say, $750,000 and move to it in four year’s time. I earn $180,000 a year. Please advise what will be best way to utilise the money and also how can I save on the taxes using negative gearing.

You have achieved good flexibility by use of an offset account and you should continue with this strategy for the new property.

By retaining the $190,000 in the present offset account, you are eliminating any non-deductible interest, and by building up more funds in a separate offset account against the new loan, you can put yourself in a position where your debt will be lower when you convert the investment property to your own home.

At that stage, you could withdraw $190,000 from the original offset account to increase the equity in the house when you live in it. This will maximise your tax deductions on the original property when it becomes a rental.




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