Ask Noel
Sydney Morning Herald
Wednesday March 2, 2011
I HOLD pre-CGT investments in property. Some years ago I obtained advice that if I wanted to make relatively modest improvements I could do so without impacting the CGT-free nature of the property. From memory, going back to Bob Hawke's time as prime minister, the figure was a limit of something like $50,000, which was indexed year by year. I would be grateful if you could confirm what the position is.Thanks to indexation, the current figure for the financial year ending June 2011 has become $126,919 the capital improvement has to be less than 5 per cent of the sale proceeds of the property.I am a 51-year-old single woman with no dependants. My salary is $89,000 a year and I salary sacrifice $300 a month. I have a property valued at $450,000 with a mortgage of $110,000 on which I pay $1000 a month. My super balance is $135,000. How can I build up my super to a level where it will support me in retirement.One of your first goals should be paying off your house as soon as possible so I suggest you try to pay back at least $1320 a month on your loan this will have it paid off in 10 years. Paying it back any quicker would not save you much interest and would also delay your investment program. If your salary increases by 3 per cent a year and contributions remain at 9 per cent of salary, you should have $668,000 in super at age 65 if your fund could earn 9 per cent a year. Obviously, this will be boosted by any extra funds you can contribute so do your utmost to salary sacrifice as much as you can afford. Also, make sure you meet with your advisor regularly to ensure your retirement plans are on track.Due to an unfortunate business enterprise, we lost everything about five years ago. My husband is retired, has no super and on a part pension of $60 a week. I am 58 and work full-time, earning $52,000 a year. We scraped together enough for a deposit on a house on which we have a mortgage of $185,000. I may be made redundant in the near future. If this does happen, should I withdraw my super ($72,000) and pay a lump sum off my mortgage to save on interest? I am not sure if I would save more interest on my mortgage than I would earn leaving it in my super, where it is. Is there any advantage in leaving it where it is for the next seven years?Withdrawing your super and paying it off the mortgage will give you a capital-guaranteed return of the mortgage rate, which is probably about 7.5 per cent. This is probably a better option than keeping the loan because future returns from super cannot be guaranteed. Paying the super off the loan will reduce the debt to $113,000 but you will still need to find ways to pay this off. It would certainly be worthwhile finding some kind of job.Noel Whittaker is a director of Whittaker Macnaught. Advice is general and readers should seek their own professional advice. Contact noel.whittaker@whittakermacnaught.com.au.Questions to: Ask Noel, Money, GPO Box 2571, QLD, 4000, or see moneymanager.com.au/ask-an-expert.WHEN professionals in the retirement industry talk about "achieving a retirement income of 62.5 per cent of a person's last salary" are they referring to the gross or net salary? I notice the percentage seems to be a bit rubbery and can bounce around depending on who is offering the advice. Is there a happy medium?They are usually talking about net income but any numbers quoted are nothing more than a rough guess because the amount of money you will need in retirement depends on a host of factors, which include the state of your health, how long you will live and the rate of return you can achieve on your portfolio. This is why it is important to have an annual review and change your strategy if appropriate.
© 2011 Sydney Morning Herald