James Wrigley, Senior Financial Advisor at First Financial, answers money questions every Wednesday.
Hello James,
My husband and I are in our early 60s.
You will inherit approximately $500,000 in the next six months and I was wondering if it is a good idea to put $300,000 into your super.
If we do this, should we keep the remaining $200,000 invested in our bank solely in your name?
He still works full time. I don’t work and I don’t have a pension.
Greetings,
Vivien.
When it comes to retirement, there are two types of contributions that can be made and both are worth exploring, writes James Wrigley.
Hello Vivien,
Thanks for your question. It is a common situation that people find themselves in when it comes to inheritance.
He does not mention whether he still has a mortgage on his house. If so, paying off your mortgage with the inheritance would be an excellent first step. So contributing to super if there is money left over is a good idea.
When it comes to retirement, there are two types of contributions that can be made and both are worth exploring.
1. Concessional contributions: These are the pre-tax contributions your employer makes for you (currently 11.5 per cent of income) and any salary sacrifices you may make. You can also make this type of contribution with cash you have in your bank account (inheritance in your case) and claim the contribution as a tax deduction by completing a notice of intention to claim form, sending the form to your super fund and notifying your accountant when filing your taxes.
The annual limit for this type of contribution is $30,000, including what your employer contributes for you. If you have less than $500,000 in super (measured at the end of the previous year) then you will have access to something called concessional contribution carryover, this allows you to use unused limits from the last five financial years to generate a higher tax. deductible contribution in the current financial year.
So the first thing I would ask you to do is check to see if your husband has any such contributions available, then use the inheritance money to spend what he could have and create a nice tax deduction in the process.
2. Non-favorable contributions: This is a contribution you make to retirement with after-tax money (inheritance in your case) and you do not claim a tax deduction for it. The annual limit is $120,000 or you can use the limit for the current year and the next two years to make three separate payments of $120,000 for a total of $360,000 at once.
To make such a contribution, you must be under 75 and have less than $1.9 million in super. You mention that you don’t have super, so you could make this type of contribution in your name if you wanted.
The last thing worth exploring is getting your husband to maximize his concessional contributions to the super. If you’re already doing it, great. But if not, I suggest you investigate whether you can afford it. If you can afford it, great. If you can’t, a transition to a retirement strategy could help you maximize your pre-tax super contributions, saving some tax and growing your super in the process.
I hope this helps.
Thank you,
Jaime.
Send your questions to James at thewealthbuilder@dailymail.com.au
James Wrigley is a representative of First Financial PTY LTD ABN 15 167 177 817 AFSL 481098
This column has been written for general information only.
Every effort has been made to ensure it is accurate; however, it is not intended to be a complete description of the matters described. This has been prepared without taking into account any personal objectives, financial situation or needs. It does not contain and should not be considered to contain any securities advice or recommendations. Furthermore, it is not intended to be relied upon by recipients in making investment decisions and is not a substitute for the requirement for individual research or professional tax advice.
First Financial Pty Ltd makes no warranty as to the accuracy, reliability or completeness of the information contained herein. Except to the extent that liability cannot be excluded under any statute, First Financial Pty Ltd and its directors, employees and consultants do not accept any liability for any errors or omissions in this presentation or for any consequential loss or damage suffered by the recipient. or anyone else. . Unless otherwise stated, First Financial Pty Ltd is the source of all charts; and all performance figures are calculated using exit-to-exit pricing and assume reinvestment of revenue, taking into account all fees and charges but excluding the entry fee. It is important to note that past performance is not a reliable indicator of future performance.
No part of this presentation should be used anywhere else without the prior consent of the author.