How can I best help the grandkids save for a first home?

My granddaughter will be 21 next week. We are going to open a bank account for her to get a home loan when the time is appropriate – I will match every deposit she makes. Our dilemma is, who do we open an account with?

These days it’s all about relationships – so ideally you would open the account with the bank you would expect to borrow from. If you don’t have a strong bank connection now you could encourage your granddaughter to search the kind of loans she would be looking for when the time comes, and together you could open an account. This will give her some great financial education, as well as making you both partners in this project.

If you want to help your grandkids get started on a home deposit, it’s wise to think carefully about what account to open.Credit:Simon Letch

My father is age 90 and entering residential aged care. If they sell their home to fund their accommodation payment, can the remaining proceeds be contributed as a downsizer contribution?

There is no upper age limit when making a downsizer contribution and there is no requirement to purchase a new principal residence. As long as he meets the other eligibility criteria, (including the home qualifying for at least a partial CGT main residence exemption and being held for at least 10 years) they are eligible to make a downsizer contribution.

However, the impact on his social security entitlements and aged care fees needs to be considered. Funds contributed to superannuation as a downsizer contribution will, in this case, be assessable assets and deemed for both social security and aged care fee purposes. I suggest you take advice from an advisor who specialises in this area.

We are in our late 80s with a SMSF in pension mode valued at $600,000. We now wish to close this fund & transfer to a public superannuation fund. Our pensions are ‘grandfathered’ under the 2015 legislation and not included in our personal income tax returns. Our joint income, other than the pensions, has always been less than the Commonwealth Seniors Health Care card threshold level. We are concerned we will lose our Commonwealth Seniors Health Care card if we close our SMSF and transfer to an industry fund as we have read warnings that the transfer from our SMSF would lead to a loss of grandfathering.

Transferring from your SMSF to an industry fund will lead to a loss of grandfathering, however If you are asset tested, grandfathering should not affect you. It only applies to income tested pensioners. It also applies to CSHC recipients but based on the information supplied you are well under the limit for that.

We are fortunate to have a fully owned non-geared apartment which provides useful net income. Our total taxable income falls comfortably below the level at which we incur a tax liability, so our few franking credits accrued from our limited shareholdings are refunded in full every year. If we did not claim the tax deductions available through expenses incurred on our rental property, our income in any year of normal share transaction would still not result in us paying tax on our taxable income.

Sometime in the upcoming years we intend to sell the apartment, and we expect that this will create a substantial capital gain which will definitely create a tax liability in the year we sell. I note that when we assess the capital gain that we need to report in our income in the year we sell the apartment, we can deduct from the gross capital gain any expenses associated with owning the property over our period of ownership where these expenses have not been claimed against rental income in earlier years. Do we have a choice in every year we earn rental income whether we claim expenses like rates in the year they are incurred? Or can we choose not to claim them against rental income and retain them to reduce the capital gain when we sell the property?

You do not have a choice here – only expenses that are not claimable can increase the cost base. When you do sell, it may be possible to use tax-deductible superannuation catchup contributions to reduce that capital gain. You would need to be eligible to make such contributions, and the contributor could have no more than $500,000 in superannuation as at June 30 in the year before you make a contribution.

If both partners balances are unequal, it may be possible to use a withdrawal and re-contribution strategy to achieve a balance of $500,000 each or less.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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

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