House That Super Built Must Wait Till You Retire
Sun Herald
Sunday December 21, 2003
SINCE being made redundant four years ago, my 58-year-old husband has found only casual or contract employment. We want to use all his super to help build a home, but he's been told he must retire before the money will be released. I'm a public servant and will retire and take a full pension when the home is built.
P. S., Muswellbrook
Super preservation rules let benefits become non-preserved under specific conditions of release. The one affecting your husband lets preserved benefits be accessed if a person over 55 retires completely.
(Conditions for people over 60 are less stringent; they need only to change jobs, or leave one part-time job while staying at a second if they have two, so if you haven't started building your new home yet, you may consider waiting a couple of years.)
Now, it is not illegal for people to retire and then change their mind and go back to work. I'm sure APRA and the ATO don't like it but as long as the initial retirement is genuine and not simply an attempt to gain access to one's super benefits, there is no law against it.
If you have already started building, perhaps your husband can discuss the benefits of retirement with his employer. If you have not started building, perhaps you should sit back and ask whether it is wise to spend every penny you have on a new home just as you are both ceasing work.
Salary sacrifice is best
I OWE about $309,000 on an investment property valued at $520,000 and costing about $2500 a year (after negative gearing). I get $330 a week rent. If I sold, how could I roll some or all of the profit into my self-managed super fund to defer or eliminate capital gains tax?
S. H., Sydney
I can't believe how low rents are compared with values. As a rule of thumb, I'd expect a property to produce a rent of about 5 per cent; you're getting 3.3 per cent.
Adding money to super to reduce tax depends on whether you are eligible to make a deductible contribution: you have to be self-employed or unemployed and have received no super contributions from an employer this financial year.
If you are employed, the best way to reduce your taxable income is to salary sacrifice as much as you can.
Learn the jargon
HOW do we go about attending a beginners' course at the ASX?
J. M. and D. O., Sanctuary Point
The next series of ASX one-day courses is scheduled to start on February 7, called Starting in the Sharemarket.
You can book by phoning the ASX on 1300 300 279. Each course costs $150, or all four courses in the series come for $400.
Read two or three books on the subject before taking a course, just to minimise any difficulty you might have in understanding the jargon.
If you have internet access, the ASX website www.asx.com.au offers free online classes covering shares and other listed securities.
The act of balancing
I WANT to rebalance my share investments, which are spread banks 15 per cent; utilities/infrastructure 15 per cent; blue-chip growth 35 per cent; property 15 per cent; international 7 per cent; speculative 3 per cent; cash 10 per cent. How do I classify Rio Tinto, Macquarie Bank, AMP, IAG and OM-130 in terms of my portfolio guidelines?
J. O., Terrigal
Start with the ASX classifications and try to squeeze them into your simplified list. Rio Tinto is classified on the ASX as diversified metals and mining (perhaps blue-chip growth in your list?), Macquarie Bank is in the diversified financial resources sub-sector (banks in yours?), AMP and IAG are in the insurance sector (blue chip growth?). Ord Minnett's OM series of funds offer a capital guarantee, usually over about seven years and no income and, I think, are unlisted (blue-chip growth?)
But I would take issue with your classification system. You should not ignore the fact that stock exchange success is best determined in the long term by income. In other words, a high-yielding stock (proving it has good management, good profits and good prospects) usually provides the best value, and usually leads to above-average capital growth.
So I suggest adding an income category to your system.
I also caution against too much benchmarking. Investors have been revolting against fund managers who have lost money in the past couple of years but claimed success on the ground that they beat their benchmark. A sector-neutral approach is more likely to achieve better results, as long as you don't put too much money in the one sector.
• WRITE TO: Personal Investment, PO Box 3001, Tamarama , NSW 2026. HELP LINES: Tax 132861; Banking Ombudsman 1800 337 444; Pensions 132300.
© 2003 Sun Herald
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