I am 59 years old, and my retirement balance is approaching the $2 million transfer balance cap. I expect to continue working for a few years and collect more. Where do I keep extra funds? Is it better to add to your super account, or start investing outside of super?
Balances over the transfer balance cap (recently raised to $2.1 million) remain in the accrual phase and are taxed at 15 percent on income and 10 percent on capital gains. This is an attractive result for most people with significant wealth, so I wouldn’t worry about overshooting your cap.
In fact, this is likely to be a sensible strategy. Once you retire you can always withdraw the money anyway, so if it doesn’t make sense to pay these taxes at some point in the future, you’ll simply withdraw the funds. This “extra” pool of savings can also come in handy for lump sum expenses like a car update, 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 with just a small fee to my broker, but will the ATO treat this transaction as “selling” the shares in the SMSF account, making it liable for CGT?
Yes, they will. What you are doing here is a specific transition. It is largely a psychological piece. The result from a tax point of view will be the same if you sell the shares in your personal name, deposit the cash into your super, and then simply buy the shares back.
The only benefit to making a specific transfer is a small savings in brokerage costs, although often these savings are outweighed by the paperwork required.
My 18 year old daughter has been working for 9 years and has $3000 in savings. She continues to work, earning $150 per week. How could she invest this money?
I can’t recommend specific products here, but there are several good low-cost options that focus on index-type investments that will work well. Ideally look for one that offers automatic regular savings plans at no cost.
It will definitely be great for your daughter to get this early investment experience. Knowing how the markets go up and down will set him up for the future when he has a lot of money.
I recently read that the government is changing the rules regarding SMSF borrowing to buy property. I own an apartment in my SMSF and have a loan on it. I don’t have the cash to pay off the loan. Will I have to sell the property? It costs less than what I paid at the moment, so I really don’t want to do that if possible.
You are right here because the change is only related to new investments. You will not be forced to sell your property. That said, make sure you believe it’s a good investment. It may be a case of taking your medicine for a loss, and investing your savings elsewhere with better growth prospects.
Assuming you decide to keep the property, do everything you can to diversify the holdings within your SMSF as new money enters the fund – employer contributions and rents. Too often I see people deploying strategies like the one you’ve started here, having all their eggs in one basket, and if the property doesn’t work out, their retirement results are severely damaged.
Paul Benson is a Certified Financial Planner at Guidance Financial Services. He hosts. Financial independence Podcast enquiries: paul@financialautonomy.com.au
- The advice given in this article is general in nature and is not intended to influence the reader’s decisions about investments or financial products. They should always seek professional advice that takes into account their own personal circumstances before making any financial decisions.
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Paul Benson is a certified financial planner, and host of the Financial Independence podcast.
