If it’s transferred to her before your death,you will be liable for capital gains tax which would be substantial given the large gain. However,if you leave the property to her in your will no CGT will be triggered on your death and will only be payable if and when she sells the property.
A simple mistake could send tens of thousands of dollars to the taxman.Simon Letch
If she continues living in the property for many years the capital gain will increase but the proportion that will be taxable reduces pro rata as time goes by. Once it is in her name,she can cover it with her main residence exemption.
She will also be able to increase her cost base by any holding costs not claimed as a tax deduction by you or her. This includes interest,rates,insurance,repairs and maintenance,even cleaning materials.
You need to consider whether it is worth paying the CGT and stamp duty now to transfer it into her name,weighing up covering it with her main residence exemption against the probability of her choosing not to sell the home in her lifetime so the CGT will disappear.
I am 72,still working and have $550,000 in super,almost all of it in a pension account from which I receive the minimum mandatory withdrawal amount. The ATO site states that I am not eligible to carry forward the unused concessional contributions cap because my total super balance exceeds $500,000. If I were to reduce the total balance to below $500,000 by taking a lump sum withdrawal would that make me eligible for the carry-forward arrangement? I’m looking to generate contributions to reduce a capital gains tax liability.
The strategy appears sound. As you are under 75 and still working you can make deductible concessional contributions to super. Eligibility for catch-up contributions works on your balance as of last June 30 – so to make the transactions you wish in the next financial year you would need to make sufficient withdrawals to reduce the balance to under $500,000 by June 30,2024.
Just keep in mind when calculating catch-up contributions that the employer contribution is included. I suggest you seek advice.
I have a question about the 15 per cent tax on a super death benefit paid to a non-dependant. My nominated beneficiary is my wife and I know that tax is not payable in that case,but what happens after she passes away,and the combined super goes to our child? Do the taxable and non-taxable portions of what was my super remain in place or is the taxable component eliminated when it is withdrawn from my account on my death?
It depends on how your wife receives the super death benefit. If she takes it as a lump sum (tax-free) the assets are outside the super system and not subject to the 15 per cent death benefit tax if the assets go to your child when she passes.
However,if she takes the death benefit as a super income stream,upon her death any remaining taxable portion paid to the child will be subject to the 15 per cent tax.
Would taking out a reverse mortgage affect a person’s age pension?
Drawing down on a reverse mortgage should not affect your pension unless you draw a large sum and put it into a bank account. It may then be assessed.
The way around this is to only draw down on your reverse mortgage as you need to,and don’t draw any lump sums unless you intend to spend them immediately. This is also a prudent way to manage the loan because the later the drawdowns start,the less interest you will pay.
Noel Whittaker is the co-author of Downsizing Made Simple with fellow finance expert Rachel Lane, available. Email:
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