Opinion
My bush property is too big for me to get the pension. What can I do?
Paul Benson
Money contributorMy property is 120 acres; 115 acres of that is totally useless for anything except for the bush, trees and the wildlife it supports. This is fine by me. The problem is that I am unable to get the pension because of the size of the land, even though I am eligible in every other way. Things are financially difficult right now, and the pension would help tremendously. I have lived here for 18 years.
The size of your land isn’t preventing you from getting the pension – it’s the value of the portion of your land that is not considered your home. According to Services Australia, “normally only two hectares of land on the same title as your main home are exempt from the assets test”.
While being on acreage can be pleasant, the size of your property can risk stymieing your pension options.Credit: iStock
You are in a tough spot here because the means testing assumes that the assets you own excluding your home are available to help meet your living costs.
There is something called the Extended Land Use Test which applies when you have lived on your property for 20 years in a row. It appears this might provide a solution to your problem in a couple of years.
It might be worth booking an appointment with a Centrelink Financial Information Service Officer in your region, as they will be familiar with the options available to you.
I am 50 and earn $230,000 a year. My husband is retired. I would like to buy a one-bedroom unit for around $350,000 as an investment property. I can see that units like this generate rental returns of about 5 per cent per annum, but annual growth of less than 1 per cent. We can afford to buy this property outright, so is it better to buy in my name for negative gearing benefits, or in my husband’s name?
Does this actually stack up as an attractive investment? If the rental yield is 5 per cent, I imagine that would be before costs like council rates, insurance, maintenance and perhaps land tax.
If, after all these costs, the net yield was, say, 3 per cent – being generous – then your total return is 4 per cent (3+1), which is less than you would earn parking your savings in a risk-free (and headache-free) term deposit with a bank.
Factor in vacancy periods between tenants, and the inevitable kitchen or bathroom refresh at some point in your ownership period – and perhaps a new hot-water unit or air-conditioner – and you may make no money at all.
Regarding your question about ownership, however, we’d have to run the numbers, but if your retired husband has minimal taxable income, my guess is that the optimal result would be for the property to be ungeared in his name.
The rental income would be less than the tax-free threshold, so likely there would be no tax on the income (depends what other investments he owns), and with this approach, you don’t need to be paying the bank interest.
I don’t expect to go through all of my superannuation savings. Every three years I sign a fresh Binding Death Nomination – nominating my two children 50/50 for the entire amount. Both children are in their 30s, grown up and not financially dependent on me. I was told that because they are no longer dependent, they will not on my death be accepted by my super fund in my Binding Nomination. Is this correct?
I don’t believe this is correct, though I understand it is possible for a super fund to include non-standard requirements as to who can be a beneficiary. I’m unaware of any major funds doing so, but it would be worth speaking to your fund again to clarify.
Ordinarily non-dependent adult children can be nominated as beneficiaries on your super fund. The non-dependency status just means there will be tax payable on the benefit paid out to them.
If the super fund is making you uncomfortable, you could perhaps have your superannuation benefit paid out to your estate upon death and then within your will specify that these proceeds are to be split equally between your two children.
The only issue here is that it could be impacted by a challenge to your estate, were that to occur. Perhaps worth a discussion with the solicitor who arranged your will.
Paul Benson is a Certified Financial Planner. Questions to: paul@financialautonomy.com.au
- Advice given in this article is general in nature and 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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