Principal sum

Super contributions – are they the best option for investing a lump sum?

Question 1. I received an inheritance from my mother of $112,000 (my share of a homestead). I’ve researched Moneysmart, called my accountant and the ATO etc, but I’m still not sure how much tax, if any, I have to pay on this. I maxed out super this year $110,000 and I’m sacrificing 10% of salaries, and some non-concessional after tax too, but I’m under the limit. I am currently 67 and entitled to a full pension, but chose to work to build my super etc.

My marginal tax rate seems to hover around 11% because I have variable/occasional income. Therefore, I was planning on not applying for the prime rate in July. Will I be exposed to capital gains on the sale of the property, only, or additional tax as well? Thanks

In relation to the family property, was it your mother’s principal residence? If so, no tax is due. If not, and the property was sold before you received the funds, then any capital gains would be assessed on the tax return of the deceased’s estate.

So it appears that you are not personally liable for any CGT unless the property passed directly to you and you then sold the property.

A few other points to note:

You said your marginal tax rate is about 11%. However, this looks like your average tax rate. The difference being your marginal rate, this is the tax you pay on the highest part of your income only, see table below. The average tax rate is your total earned income divided by the income tax paid.

For example, if you earned $50,000, your marginal tax rate is 32.5% because this is the highest rate paid on the amount earned over $45,000. But the income tax paid on $50,000 is only $6,717, giving an average tax rate of 13.43% ($6,717/$50,000).

Note that the example above does not take into account the Medicare levy and any tax offsets.

Regarding the retirement age, it is worth applying even if you are still working.

Due to the area with no income and work bonusa single person can earn over $60,000 from work and still receive a part-age pension.

Question 2. I am 55 this year. I have about $80,000 in a term deposit that earns virtually no interest. Is depositing it into my superannuation a better way for me? I work casually and have only been doing it for two years, so I have virtually no pension contributions behind me.

These are actually two separate questions:

  • Should I invest in something other than a term deposit?
    (This is an investment decision)
  • Should I put money in my own name or in super?
    (This is a question of tax structure)

If you don’t need to spend that money in the next few years and you can accept some short term ups and downs then yes you should be looking at other investments for at least some of that money to give you better performance. come back.

It could be super or super outside.

As a general rule, for someone your age, it’s safe to look to contribute to super because you can get tax advantages and as you approach retirement you don’t lock in the funds for too long.

However, your situation may be different. Consider that you can’t touch the funds until you’re at least 60 years old, and if you don’t pay any income tax, then super might not be best for you.

Many super funds offer personalized advice on investment choice and super contributions at no additional cost. You should discuss this with your caisse.

Question 3. I am unemployed, my rent is $540 per fortnight (which I recognize to be cheap rent) but that still represents nearly 70% of my income. What do you advise me to do without, food, gas, electricity, transport, telephone or internet?

Seventy percent of your income in housing costs is not sustainable at all.

Unemployment is at its lowest in almost 50 years in Australia, so now might be the best time to see if you can find a job.

Other than that, you’ll need to look to move in with someone, split rental costs, and/or seek help from a charity service such as Foodbank.

In an emergency, there are services to help you with food, housing and bills, as well as emotional support.

If you don’t know where to start, call the free National Debt helpline on 1800 007 007. The helpline is open Monday to Friday, 9.30am to 4.30pm.

Craig Sankey is a Certified Financial Advisor and Head of Technical Services and Advisory Enablement at Industry Fund Services

Disclaimer: The answers provided are of a general nature and although inspired by the questions asked, they have been prepared without taking into account all of your objectives, your financial situation or your needs.

Before relying on any information, please ensure that you consider the relevance of the information to your objectives, financial situation or needs. To the extent permitted by law, no liability for errors or omissions is accepted by IFS and its representatives.

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