Should I put my property profits back into my super?

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I am 56 and working full-time. I have about $355,000 in super. I have just sold an investment property and now have $200,000. Should I put this into my super or some other investment like shares? My super is pretty much in an Australian index fund.

Super is an excellent choice because you are old enough that lack of access should not be a problem, and you’ll be placing the funds in an area where income tax is just 15 per cent per annum. If you put the money into the balanced fund you will get diversification.

Take advice about possible CGT on the sale of the investment property. It may be possible to reduce that with a tax-deductible contribution to super. Just bear in mind the maximum deductible contribution would be $27,500 which includes any employer contribution made for you.

If you’ve sold some property and are thinking about where to invest the proceeds, super can be an excellent choice.Credit: Simon Letch

I have a large number of CBA shares with a large potential CGT liability on disposal. On my demise, a testamentary trust is to be established, and these shares will be transferred into it. I understand this is not a CGT event, but when eventually sold, do they maintain the 50 per cent CGT discount under the trust structure?

It is clear that CGT does not apply if an asset that was owned by the deceased just before death is transferred to the deceased estate. But whether transfer from the estate to a testamentary trust is a CGT event is somewhat more complicated.

The best research I can find indicates that CGT should not apply when an asset owned by the deceased individual is transferred to the estate, and the same asset is transferred from the estate of a testamentary trust or the same asset is transferred from the testamentary trust to the ultimate beneficiary named in the will. The 50 per cent discount should still be applicable. Obviously, you’ll need to seek professional advice.

On retiring 18 months ago I used a financial adviser to assist with my super and a part pension. She organised an annuity of $100,000. Not understanding at the time what this meant, I proceeded with what she advised. Because of the financial struggles we are all experiencing I thought I would increase my monthly payment. However, I found out that I am to receive $443.45 a month until I am 88 – if I live until then. It does not rise with inflation and doesn’t earn any additional increases for me. I am locked into this for the life of the annuity. If I choose to cancel this annuity I will receive $75,000 of the original $100,000. I now know that an annuity assists with the level of pension I receive, but I feel I could be doing more with my money. Are you able to assist?

An annuity is a contract, and I’m sure you would have been advised when you took it out that such a contract is wholly inflexible and likely to have a low residual value if you try to cash it in early.

As you say you have received additional age pension benefits because you bought the annuity. You need to understand that when you buy an annuity indexed for inflation the payments start at a much lower level that if you had one where the payments do not change over time.

In the examples I have seen you would need at least 10 years of time with a CPI indexed annuity to make up what you would have received with a non-indexed annuity.

I am 76 years of age, and I am thinking about retirement villages. As our money is invested in term deposits and superannuation what happens to the payment for the village? Will they wait until you sell your house or do you have to pay the full price before moving in?

The creator of Village Guru, Rachel Lane, explains that most retirement villages only require a small deposit (often it is in the order of $1000 to $5000) to hold the property for you. Your contract to buy the property would then be either unconditional (if your property has already sold or you are selling other assets to fund the purchase) or it would be conditional on the sale of your home within a certain period of time (again it varies but 90 days is not uncommon).

Normally you can’t move into a property prior to settlement (paying). However, some villages may be willing to offer you a Deferred Payment Arrangement where you can settle on your new home and pay the balance when your home is sold.

If the village doesn’t offer a Deferred Payment Arrangement and you want to move in straight away then you may need to look at using your investments or borrowing through what is called bridging finance, which gives you the money now to buy your new home and is repaid when your old home is sold.

Before you decide on which property to buy make sure you get a Village Guru report: it crunches the numbers on the village costs and can provide you with an estimate of your Age Pension and Rent Assistance entitlements and your Home Care Package fees and funding. It’s great information to have before you sign on the dotted line.

Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Email: [email protected]

• 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.

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