From taxes on inheritance to ETFs, franking credits and capital gains tax

My father had a fall and is going to aged care. I’ve been doing the calculations and it seems to me that the simple strategy is to put all the money from the sale of the house into a non-means-tested refundable accommodation deposit (RAD). Is this a good idea?

Aged care guru Rachel Lane says it’s not that simple. The bigger question is whether you should sell the house. There is a two-year home exemption for retirement purposes and for aged care means testing this is only assessed up to the $210,555 ceiling.

While it may seem like a no-brainer to sell the house and pay the RAD so that you don’t have to pay the 7.61 percent annual Daily Accommodation Payment on the outstanding RAD, you need to look at the whole picture.

When it comes to paying RAD, it is exempt from the pension assets test but may be assessed for the aged care assets test. If the house has already been sold, it would make sense to pay RAD because you can’t earn 7.61 per cent and you can’t have a pension-free asset anywhere else.

But if the home hasn’t sold, it pays to do the totals on whether you should keep it or sell it before making the call. If your father moves into aged care after 1 November 2025, there’s another thing to consider: an exit fee of 2 per cent per annum (up to a 10 per cent cap) on his RAD. This is an area where expert advice is always required.

Are there ETFs that track the top 200 or 300 companies on the ASX and pay full-blown dividends?

It’s not possible to have an ETF that both reflects the top companies on the ASX index and pays 100 per cent franking. Franking credits arise only from the tax a company pays in Australia.

This means companies with carry-forward tax losses or generating significant overseas income may pay little or no Australian tax and therefore may be able to provide reduced or no credit credit. As a result, any ETF tracking the index will always reflect the mixed franking levels of the companies it holds.

I retired in April 2025 and am about to sell my investment property that I have had in my name for 20 years. The selling price will be approximately $600,000, and its original cost in 2001 was $232,250. I have no other income and am living off my retirement. Will I be subject to capital gains tax, and if so, how much?

Generally speaking, assuming the property cost basis is $260,000 and the net sales price is $580,000 after adding acquisition costs, you have a capital gain of $320,000.

This amount will be reduced by 50 percent for tax purposes because you have owned the property for more than 12 months. So $160,000 will be added to your taxable income in the year of sale. You say you have no taxable income, so you would have $160,000 in taxable income for the year the sales contract is signed, and the tax on that would be about $44,000, including Medicare tax.

This is something you should discuss with your accountant because adjustments may be made for the money you have spent on the property since ownership, as well as any depreciation claimed over the period of ownership.

Noel Whittaker is the author of: Retirement Made Easy and other books on personal finance. Questions: noel@noelwhittaker.com.au