Ask Noel: energy discounts, capital gains and more

By , 18/02/2019 16:13

RECENTLY you stated that Commonwealth Seniors Health Card (CSHC) holders also receive an Energy Supplement, viz. $366.60 per year for singles and $275.60 per year for each eligible member of a couple. I’m told that this is incorrect. Apart from the recent one-off supplement of $125 per household which was recently paid, CSHC members have no other energy entitlement, so I am advised. Would appreciate your thoughts. What is the Low Income level that applies, and what are the requirements in order to meet the Low Income Test?

A department spokesperson says that CSHC holders may receive the Energy Supplement depending on when they claimed and were eligible for the card. Since March 20, 2017, the Energy Supplement is no longer paid to new CSHC holders. CSHC holders who were receiving the Energy Supplement on September 19, 2016, will continue to receive the Energy Supplement as long as they remain eligible for a qualifying card or income support payment.

To receive a Low Income Health Care Card (LIC) individuals must meet residence and income test requirements. The income test looks at the gross income earnt for the eight weeks before a claim is submitted. The amount that can be earnt depends on the individual’s situation.

More information on the LIC can be found on the Department of Human Services website.

I am 76 and in the process of writing my will. I have $380,000 in super. I intend to leave the balance on my death to my two grandchildren, ages 25 and 22. I understand this will incur a death tax of some 15 per cent, plus 2 per cent Medicare Levy.

If this is correct, is it advisable to withdraw the balance and place the funds into a term deposit or an alternative that you may recommend. Would putting the money in the bank affect my pension?

This is partly true. Your superannuation will probably, but not necessarily, have a taxable component and non-taxable component. Only the taxable component would incur the death tax if left to a non-dependant. I assume from the information provided your grandchildren are not dependants. Yes, I agree you should withdraw the money at some stage, but when this should occur will depend on your age and the state of your health. For example, if you are in good health I wouldn’t be rushing to do it. Keep in mind that you can appoint an enduring power of attorney and give that person the power to withdraw all your superannuation and place the proceeds in the bank if you are at a stage in life when you believe that death is imminent.

Putting the money in the bank should not affect your pension as your super is being assessed now under the deeming provisions.

My wife and I are trustees of a SMSF, established about 15 years ago. The fund has substantial unrealised capital gains, but also some unrealised capital losses. The gains far exceed the losses. We are thinking about establishing a corporate trustee but do not understand whether such action would trigger a capital gains event. Could you please advise?

There should not be a capital gains/loss event because the beneficial owner remains the same. However, in some states, I believe there could be stamp duty issues depending on the assets the fund holds and how the paperwork of the trust deed was prepared. Make sure you take expert advice every step of the way.

I’ve read conflicting information about the ability to ‘‘convert’’ a property from non-tax deductible owner-occupied to a tax-deductible investment property. My understanding is that if a home loan is taken out for the purposes of buying a home to live in, and that property is later rented out, the loan interest cannot be claimed as a tax deduction against rental income because the original purpose of the loan was not for investment purposes. Is this correct? I’ve recently read commentary that suggests that when the property becomes an investment property the interest becomes deductible even for the same loan.

The interest is not deductible while you are living in the property but as soon as you move out and rent it the rents become taxable income and all expenses, such as interest and rates, become deductible. However, if you move into your rental property the interest ceases to be deductible.

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

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