Author: Michelle Griffiths, Partner, TAG Financial Services
In our recent webinar “Mistakes to avoid when downsizing” some interesting questions were asked. Here are the answers
Q: I am planning to move in with my daughter and her family – is there anything that I can do to help with the Centrelink treatment of the proceeds of my home if I am going to do this (not rebuying another property)?
A: There may be some options in that instance where we can still use the “1 year deferral” rules on the Centrelink rules. In particular, we should investigate if the relationship with your daughter and yourself might fit into the category of being a “granny flat interest” – and therefore there are some special rules around this that may help your overall Centrelink assessment. This is a bit complicated, from the perspective of what is required (legal documents for example) and how it is treated. If you would to know more about this topic, please get in touch with us.
Q: Can we make the $330k NCC and the downsizer contribution in the same year?
A: Yes, the Downsizer and the NCC rules are independent of each other. Therefore, you may be able to do both in the same year.
Q: Can you use the proceeds from the sale of the property to make the NCC? Or is only for the Downsizer contribution?
A: As mentioned before, you can use each of these rules if you are eligible and therefore make as much as $630,000 contribution each in the one year.
Q: If I have less than $600,000 from the sale of the home (between my wife and I), can I put less than the $300,000 in for either of us? We have sold for $900,000 – but then have had to pay off the loan of $400,000 – so only have $500,000 available.
A: You can only put in the greater of either $300,000 each or the total proceeds of the sale of the property. The rules don’t make any adjustments based on the fact that you may be paying off debt. In your circumstances, you would be able to do either the $300,000 each, or a lesser amount if you wish. In some instances there may be reasons why it is useful and beneficial to use the entire amount possible of $300,000 even if it means taking some money out of your existing super balances in order to do this, as it will create a more tax beneficial outcome for your children when they inherit this money. Please feel free to contact us to talk through this if you think this is something you would like to explore.
Q: Can I buy property in Superannuation?
A: Yes. In fact, the superannuation fund could even [XXX]
Q: Could I buy the new property for us to live in inside super?
A: Definitely not. You can only rent property owned within superannuation to unrelated parties if they are residential properties.
Q: How do some of these other fund alternatives compare with the Industry Funds?
A: This starts getting complicated, but it all depends on what you are planning to do with the investments within Super as to whether the Industry Fund, SMSF or other alternatives will make sense for you. This is can vary from person to person. If this interests you, we are more than happy to work through this with you one on one. Please feel free to call us to arrange an appointment.
Q: What is a reverse mortgage?
A: It is a mortgage on your home (as the terminology suggests). However, instead of paying down the loan over time, the option is to draw down the facility that you have set up over time, and therefore use this to supplement your other income sources. Then, when you dispose of the home, you then pay back the amount of debt plus the interest that will have accrued over the time as well.
Q: How difficult are reverse mortgages to qualify for (as clearly there won’t be any income for the bank to see that we will pay them back), and how does this work?
A: Reverse mortgages are only available to people over the age of 60. If you’re age 60, the most you can borrow is likely to be 15–20% of the value of your home. As a guide, add 1% for each year over 60. So, at 65, the most you can borrow will be about 20–25%. The minimum you can borrow varies, but is typically about $10,000. If this is something you want to explore, please give us a call and we can put you in touch with our mortgage broker who can explain how this works according to your individual circumstances.
If you would like to watch our webinar, please click here.
If you have any further questions, please contact us on 03 9886 0800 or via email.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2021. Please do not reproduce without the expressed written consent of the author.