Ask Noel: super limits, capital gains and more

I have reached my $1.6 million limit for super pension phase. I am still working. Can I still contribute after-tax monies into my accumulation fund? What happens to my employer contributions if those employer contributions cannot go into the accumulation fund?

You cannot contribute non-concessional contributions to superannuation if your balance has reached $1.6 million.  You or your employer can continue to make concessional contributions irrespective of the balance in your superannuation fund up to a limit of $25,000 a year from all sources.

I am  selling my father’s home. At settlement his total cash assets will be $919,000, of which $441,000 will be paid as a refundable accommodation deposit to the age care provider. The cash balance will be $478,000, from which he will have to pay a means-tested daily care fee of about $14,490 a year [maximum $64,000]. Can you tell me what his pension per fortnight will be?

Rachel Lane, from Aged Care Gurus, says: ‘‘Assuming the money in the bank is all of the assets, your dad’s age pension will be about $707 a fortnight and his means-tested care fee will be about $15,385 a year. It’s important to understand the direct link between the means test for your dad’s pension and his cost of care.  A specialist financial planner could tweak the assets and increase your dad’s pension to $907 a fortnight, while reducing his means-tested care fee by about $2600 a year.

I’m 31 and expecting to make $250,000 from the sale of a property before the six-year CGT exemption runs out. Would I be better paying the money off my 3.88 per cent home loan or investing it in shares?

If you pay the money off your home loan it would be earning a net 3.88 per cent – over the long-term a good share portfolio should do better than that. But remember the name of the game is to maximise your tax-deductible debt and minimise your non-deductible debt so your best strategy may be to pay the $250,000 off your home loan and then borrow back against the home to invest in shares. This would give you the best of both worlds with the interest on the loan to buy shares being fully tax-deductible. It appears from your question that you are retaining a home as your residence and selling one that is covered by the six-year capital gains tax exemption. Make sure you liaise with your accountant, because once you nominate the home you are selling as your residence, there is potential for some CGT in the future on the one you are keeping.

I read your recent article wherein a couple could negate CGT by making a tax deductible super contribution. Can you reduce the tax payable on income from working and investments by doing the same?

Capital gains tax is calculated by adding the net gain to your taxable income in the year the transaction is made. A tax-deductible contribution may put you in a lower tax bracket, which means you would may pay less capital gains tax. In the same way a tax-deductible contribution to super will reduce your income from working and from investments.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice before making decisions. Twitter: @noelwhittaker