Superannuation caps, investing for teenagers and more financial questions to answer
I’m 59 and my retirement balance is approaching the $2 million transfer balance limit. I hope to work for a few more years and save more. Where should I put the additional money? Is it better to add to my super or start creating investments outside of retirement?
Balances that exceed the transfer balance cap (recently $2.1 million) remain in the accumulation phase and are taxed at 15 percent on earnings and 10 percent on capital gains. This is an attractive outcome for most people with significant wealth, so I’m not worried at all about exceeding your limit.
In fact, it’s likely to be a sensible strategy. You can always withdraw this money after you retire, so if at some point in the future it no longer makes sense to pay this tax, you withdraw the money. This pool of “excess” savings can also be useful for lump sum expenses like a car upgrade or a big trip.
I need to transfer a share portfolio from a personal trading account to a newly established SMSF account. I can transfer shares between accounts to my broker for a small fee, but will the ATO treat this transaction as a “sale” of shares into the SMSF account and make me liable to CGT?
Yes, they will. What you are doing here is an intra-species transfer. It is largely a psychological work. The result from a tax perspective would be the same if you sold the shares in your own name, put the money into your retirement fund and then bought the shares back.
The only benefit of making intra-species transfers is a small savings in brokerage costs, but often this savings outweighs the paperwork required.
My 18-year-old daughter has been working since she was 9 years old and has $3000 in savings. He continues to work, earning $150 a week. How could he invest this money?
I can’t recommend specific products here, but there are a few good low-cost options focused on index-type investments that will do well. Ideally, find one that provides automatic recurring savings plans at no cost.
It would definitely be great for your daughter to gain some experience with investing this early. Learning how markets rise and fall will prepare him for the future when he will have much larger sums to deal with.
I recently read that the government has changed the rules around SMSFs borrowing money to buy property. I have a flat in my SMSF and a loan against it. I don’t have money to pay off the loan. Will I have to sell the property? It’s currently worth less than what I paid, so I really don’t want to do that if possible.
There is no problem here since the change only concerns new investments. You will not have to sell your property. However, make sure you are confident that it will remain a good investment. There may be a case for you to take your medicine on the loss here and reinvest your savings elsewhere with better growth prospects.
Assuming you decide to keep the property, do your best to diversify the assets in your SMSF as new money comes into the fund (employer contributions and rent). All too often, I see people implementing strategies like the one you’ve started here that have all their eggs in one basket, and if their property doesn’t perform well, their retirement outcomes suffer very severely.
Paul Benson is a Certified Financial Planner. Guidance Financial Services. He is hosting Financial Autonomy podcast. Questions: paul@financialautonomy.com.au
- The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making any financial decisions.
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Paul Benson is a Certified Financial Planner and host of the Financial Autonomy podcast.
