Illustration: Michael Mucci.

Illustration: Michael Mucci.

I am 64, my husband is 70, we are retired and live on combined fortnightly PSS super payments of $3038. We own our home outright, and have a $380,000 mortgage over an investment property worth $1 million, which earns $49,000 rent a year. We are thinking of renting out our present home, and renting a smaller place to live in so we can travel. Is this a good idea? Our pensions are tax free, so how would the tax on our rental income be affected?

If you do not intend to return to your existing home after you leave it, I wonder at the wisdom of retaining it. It is bound to drop in value once you move out and tenants move in, and it may take a long time to sell if you eventually change your mind. The rental income will probably be tax free, but this is something your accountant will be able to confirm. A better option may be to sell the house, buy the place where you intend to live for the rest of your life, and invest the balance into superannuation in your name as a non-concessional contribution.

My son wants to buy a home with me, and we would like to understand the difference between joint tenancy, and tenants in common. Is it correct that if we buy as tenants in common and one of us defaults on the loan, the bank can only repossess the 50 per cent portion of the property owned by the party who defaults?

If a couple own a property as joint tenants, the property will go to the survivor automatically on the death of the other. If a property is held as tenants in common, the share owned by the deceased can be bequeathed in terms of their will. It would be most unusual for a bank to accept the mortgage over a property owned as tenants in common without obtaining some kind of security from the co-owner, which means the whole of the property would be available to the lender if there was a default by the borrower.

I read in one of your recent articles that a person can salary sacrifice $35,000 into super. I have been told the max is $25,000. Can you explain the $10,000 difference.

The amount depends on your age. If you are under 60 the limit is $25,000 a year, if you are aged 60 or over it is $35,000.

I am 58, my wife is 59 and we hold combined super of $370,000. We own our house, plus $20,000 in shares, and have a $140,000 mortgage on a property worth $700,000, which is positively geared and returns $24,000 gross rent a year. Could we use my wife's super and dividends to pay off the mortgage, or should we refinance and pay the minimum interest over a longer term? Would a better option be to contribute $15,000 each to our super, although neither of our funds' annual returns equals the cost of the investment loan?

If you use the super to pay off the mortgage, you're making the assumption that the superannuation fund will earn less than the mortgage rate. Given your effective mortgage rate after tax may be around 4 per cent, it is reasonable to expect a fund could do better. I suggest you talk to a good adviser to agree on an asset mix within super that will give you the good long-term returns you will need for the next 30 years.

I have a $185,000 mortgage on an investment property worth $350,000, which is breaking even and not providing any negative gearing benefit. I am thinking of refinancing the loan and borrowing an extra $100,000. I would then invest $50,000 in shares and contribute $50,000 to my super. Would I be able to claim this as an investment cost and regain the negative gearing benefit for the property, given I am using the funds for investment purposes, although not for property investment?

You can claim the interest on that portion of the loan that is used to buy income-producing shares, but no deduction is allowed for interest on money borrowed to invest in superannuation.

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. Email: noelwhit@gmail.com.

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