Another alternative to HEAS is that you could downsize your home and, with $6 million, move into a fancy retirement complex and still have millions to spare.
I’m 65, my wife is 60 and we both work part-time. We have a combined $700,000 in superannuation, own our house plus an investment villa, from which we receive $590 a week in rent. We also have $600,000 cash in the bank, not earning much interest After consulting with a financial advisor, we were wondering what you think of a Managed Discretionary Account (MDA) as a way to preserve our capital and provide a stream of income once I stop working next year? My wife plans to continue working. SW
When the federal government banned trailing commissions for financial advisors, the question arose, how could their businesses survive? Faced with hours of work seeing clients and creating reports – opinion statements – those who charged one-time fees began charging thousands of dollars for their services.
However, one-time appointments create uneven revenue streams in their businesses, and it is much better to have regular streams, which is why MDAs paying regular fees have skyrocketed recently. And this despite often exorbitant annual fees from the Australian Securities and Investments Commission.
So you can see why advisors use MDAs, and there are a number of software systems offering to manage these accounts. The questions you need to answer are: Do you really want an MDA? Have you succeeded without a front? Would you feel happier if you handed over your portfolio to someone else to manage? If so, the next question is: how much will it cost and how does it compare to other MDAs?
Typically, most people go through their working life leaving their super in their fund’s default option. A smaller number seek financial advice and choose to leave their portfolio in the hands of an advisor. Which group would you like to fall into?
I have owned a vacation home in a 10 block building, which I have never rented, since 2007. I am considering selling, and I know I will be paying capital gains tax (CGT ). I read an article that said I could claim the corporation fee as part of my cost base to reduce my capital gain. Could you clarify that? Can I also claim the rates? MM
The Australian Taxation Office lists five elements of a cost base. The first is the price paid, the second includes the costs of buying and selling – stamp duty, advertising, etc. Also, tax advice, if engaged after June 30, 1989.
Your question relates to the third element, which includes the costs of owning a CGT asset, expenses that were not charged to income since, in your case, there were none. These include rates, corporation fees, repairs, property tax, insurance, mortgage interest, etc., provided the property was purchased after August 20, 1991. Just make sure you have the receipts.
The fourth and fifth elements cover all capital costs to preserve or increase the value of the property. For example, requesting zoning changes and defending your property.
If you are unsure, consult a tax accountant. There is usually a lot of money involved in the sale of a property.
- The advice given in this article is of a general nature and is not intended to influence readers’ decisions regarding investments or financial products. Before making financial decisions, they should always seek their own professional advice that takes into account their personal circumstances.
If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. All letters answered. Helplines: Australian Financial Complaints Authority, 1800 931 678; Centrelink pensions 13 23 00.
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