Personal Finance
Newcastle Herald
Thursday November 13, 2008
QI earn $57,000 to $59,000 a year pre-tax, depending on bonuses, and my wife is working casually about 20-25 hours a week. We are renting and looking to buy our first property. We have $40,000 in a savings account earning about 7.1 per cent interest. About $10,000 of that will be used for further education next year for my wife. Should we consider taking out one of the Government's new First Home Saver Accounts and commit to not buying a house for the next four years to maximise the government's contribution? Or should we look at getting into the market towards the beginning of 2010 when my wife finishes her studies? Are we allowed to start a separate account for each of us, to be able to double the government's contribution?
A You could have separate accounts, but I am most concerned about the four-year lack of access. You are in the 31.5 per cent tax bracket and your wife is probably in the 16.5 per cent bracket, so the scheme is not going to be worth a large sum to you. I suggest a better option is to save as hard as you can in your wife's name in one of the online high-interest bank accounts.Q I was considering moving from my present pension fund to another that has lower fees. Now I find that my pension fund has a substantial investment in one of the property funds that have suspended redemptions, and redemption requests will not be processed for six months. Does this mean that I can't change my pension fund until the units can be redeemed?A Your adviser will be able to confirm the position, but based on the information you have provided, it would appear that the money is entirely frozen for the time stated and thus cannot be withdrawn. Just be aware that freezing redemptions is a better strategy than the fund sacrificing the assets at fire-sale prices.Q Recently our son was transferred with his work. He left his original family home to buy another. He has been told that when he sells the original home he will have to pay some tax and if he doesn't sell within six months he will be up for full capital gains tax (CGT). Is he supposed to have a "fire sale" to avoid these taxes?A A person may be absent from their residence for up to six years, without losing the CGT exemption, as long as they do not claim any other property as their residence in that period. This is because a person is not allowed to have two homes that are both CGT exempt. There is no hurry to sell, because he need not decide which of the homes he will claim as his principal residence at this early stage. In any event, if he does decide to claim the second home as his residence, CGT will apply only on any increase in value from the time the first home was vacated. The six-months rule you speak of relates only to the period the Tax Office allows for moving from one house to another. Naturally, he will need to take advice from an accountant at some stage, but based on the information supplied, I doubt he has much to worry about.Send your questions to noelwhit@gil.com.au
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