A couple in their late sixties is considering how best to use their approximately $1.5 million in superannuation to facilitate their planned downsizing. Both retired, the 67-year-old wife and 68-year-old husband have accumulated substantial assets, including $50,000 in shares, primarily from BHP and Commonwealth Bank of Australia (CBA).
Their superannuation is divided into two accounts: the wife holds $975,000 in superannuation, comprising $170,000 in one fund and $805,000 in a defined benefit account that is yet to be activated. The husband’s superannuation balance stands at $774,000.
As they plan to move from their current residence in a lower-value area to a more expensive location, they anticipate facing a shortfall of approximately $200,000. They are now seeking guidance on whether to withdraw funds from their superannuation or sell some shares to cover this gap.
Exploring Financial Options for Downsizing
Financial expert Simon Letch advises that it is usually more tax-effective to keep funds within a superannuation account. He cautions against hastily withdrawing money, as this could lead to unnecessary tax implications. “Keeping your money inside your super account is often more tax effective,” he notes.
The couple’s situation is further complicated by the fact that some of their shares were inherited, which could trigger capital gains tax liabilities, especially if they were acquired at a low cost base many years ago. Letch suggests a balanced approach: tapping into their superannuation to cover the immediate shortfall while gradually selling shares in smaller amounts. This strategy could help them minimize capital gains tax and maintain their investment efficiency.
Furthermore, Letch indicates that it may be feasible to make tax-deductible contributions to superannuation in order to offset potential capital gains tax. Consulting a qualified accountant is essential for tailored advice on managing these financial decisions effectively.
Understanding Superannuation Rules
Clarification around superannuation rules is also necessary as misconceptions can arise. The regulations stipulate that only certain individuals can directly receive superannuation death benefits. These include dependents, such as a spouse or child of any age, or a legal personal representative, such as an executor of a will.
This limitation is crucial for retirees to understand as they plan their estates. The superannuation environment has specific restrictions on the amount that can remain untouched, emphasizing the need for clear financial planning.
As the couple navigates their financial future, their decision on whether to utilize their superannuation or liquidate shares will ultimately hinge on their long-term financial goals and the advice of their financial professionals.
