Do your research: Some ethical investment funds have done very well, but your elderly mother may not likely the volatility, so you might look around for ethical balanced funds, preferably with a large, safe institution.
Q. My elderly mother has come into an inheritance of approximately $200,000 which she wants me to invest for her. She shares a home with her sister (as tenants in common in equal shares), which is her only asset. The house is worth around $600,000. She is on the full age pension. She wants a safe investment that can be liquidated quickly should she need money to go into a nursing home, or have other high medical expenses.
While she is not seeking major capital growth, she doesn't wish to see the value of the inheritance erode away over time, given her health is good and she could live many years yet. She likes the idea of ethical investments. She wants me to invest the money in my name so she doesn't have to worry about it. As I'm her executor, she knows I'll distribute any remaining funds in accordance with her will (which divides her assets between my sister and me).
I'm in my late 50s and live on a superannuation pension (approximately $30,000 per annum) and run a small business which I am seeking to get rid of, after two flat years. Whatever I did on the investment side (in my name) needs to ensure that any increased tax liability on me is covered.
The money has been sitting in a Commonwealth Netbank Saver account I set up since the beginning of the year and we offset the interest by donating that amount to charities, but we know we can't continue with this strategy as the value of the capital will not be maintained over time. Given the above information, are you able to suggest what we should do? L.S.
A. Your mother would have a problem in that, if you invest the $200,000 in your name, she would be seen by Centrelink to have gifted it away. Thus if she gives it all to you this financial year, she would be seen to have gifted the maximum allowed of $10,000 per year. The remaining $190,000 would be counted by both the assets and income means tests for the next five years.
If she has few other assets, it may not affect her much since, as a single homeowner, she can have up to $202,000 in assets before her full age pension begins to reduce. Thus, if she has more than $12,000 in assets other than the bequest, and gifts away $190,000, her age pension will increase slightly.
One strategy might be to gift $10,000 this financial year, and $190,000 next July, in which case her pension would increase because she has gifted away $20,000 and will have only $180,000 counted as a financial asset for the next five years.
If she has less than $22,000 in cash and other investments, including personal assets e.g. furniture and a car, she will still get the full pension, otherwise it will be reduced slightly.
The alternative is for you to invest it in her name in a spread of balanced funds but have a power of attorney over the money so she need not worry about making investment decisions. Some ethical investment funds have done very well, such as the Perpetual Wholesale Ethical Socially Responsible investments (SRI) but that invests in shares and she may not likely the volatility, so you might look around for ethical balanced funds, preferably with a large, safe institution.
Q. I will shortly be turning 55 at which time I will retire from work. I understand that I can then access up to $185,000 from the taxed element of my superannuation under the low cap limit rules without paying tax on this income (having read your previous articles on these matters). My question relates to the tax payable on the other income I will receive during this financial year totalling approximately $38,000 from share dividends.
I have contacted the Australian Taxation Office about this but they will not give me a definite answer and have basically told me that I have to make a withdrawal from the super fund, lodge the details on my tax return and they will then assess it. Obviously as I do not wish to pay more tax that is necessary I would like to know the implications before withdrawing any super funds.
From my research on the ATO website it seems to me that the $38,000 dividend income will be treated as if no super income had been received (provided it is under the low cap limit) i.e. the tax free threshold and normal marginal tax rates for the $38,000 are applicable. Is this the case? B.M.
I'm always uncomfortable when someone withdraws large lumps of super without a clear strategy to replace it. The money is meant to help you through retirement which, in your case, could last over three decades.
You will also be losing any possibility of getting an anti-detriment payment, although you have to die to get one, so you personally won't notice the loss.
Read more: http://www.smh.com.au/money/tax/whats-the-best-investment-strategy-for-mothers-inheritance-20141023-11ai64.html#ixzz3JzGZnbnD
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