Receiving gifts and bequests from abroad

My elderly mother, a citizen and resident of India, no connection with , wishes to give about $6000 to each of my two sons by means of a bank transfer (SWIFT) to help with their university (HECS) debts. Both are citizens and residents of , over 21, and have never received any kind of Centrelink payments. The elder one is now in full-time work and pays regular tax. The younger one has a small income from casual work and does not pay tax. (1) What are the n tax implications? (2) What sort of documentation will satisfy the ATO and perhaps the security establishment? (3) Can she repeat this next year if she is alive? (4) What if she dies and the money is paid as per her Indian will? S.M.
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has no gift duties and your sons can receive the money and pay off some of their HECS debt with no tax payable, nor any need to disclose the gifts in their tax return.

Your mother can do this as often as she likes and I’m sure the more frequently she does, then the happier her grandsons will be! Again, if she leaves money to family members in her will, there is no death duty in and no restrictions on the money transfer.

My partner (60) and I (65) respectively, are no longer working and we don’t receive any benefits. We are quite comfortable about selling down assets to fund our lifestyle. Estate planning is not really an issue, being a same-sex, childless couple with relatives who are very comfortably off and we will be receiving our siblings’ inheritance. We own our $2 million home outright, plus two investment properties, one worth $900,000 with a $200,000 mortgage, the second, $700,000 with a $260,000 mortgage, plus a self-managed super fund (SMSF) with about $700,000 and $300,000 in cash. My thoughts were to simplify matters and sell the first property ($900,000), pay off the second ($700,000) and sit back. There will be substantial capital gains tax (CGT), but that will always be the case. We age-proofed our home when we renovated a few years ago and intend paying for services and staying independent until physical/mental health declines. What are your thoughts, given your recent comments about not selling real estate? J.M.

When weighing up competing philosophies of (a) not selling property investments until you need the capital and (b) entering retirement without debt, then the latter ranks above the former.

In other words, being in debt is always a higher risk situation. For example, interest rates can rise to take a large slice of your retirement income, or a lender can demand prompt repayment, the borrower can suffer illness, injury or a major financial setback and so on.

So I agree with your plan to clear the debt but why not keep the larger property? If possible use the remaining months of 2016-17 to maximise contributions into your partner’s superannuation account since they are still under age 65.

Don’t underestimate the value of estate planning. You should each have in place a non-lapsing binding death benefit nomination for your SMSF (first ensure that your trust deed allows them), a will to cover non-super assets, a power of attorney to cover individually owned financial assets, with another, separate, power signed as individual trustee of your SMSF, (or as directors of a corporate trustee), guardianships to make healthcare decisions if one of you is incapacitated, plus advance care directives describing the kind of extreme care you may or may not require. If you are individual trustees of the SMSF, agree who will be asked to become the necessary second trustee if one of you tumbles off your twig. In matters of deceased estates, Murphy’s Law reigns supreme.

My husband died suddenly 2?? years ago. I live in our home, valued at $700,000, and I paid the mortgage out with my husband’s super. I sold an investment unit and am now due to pay $43,000 in CGT in March. We own the house next door as well, valued at $600,000, with a mortgage of $300,000, and my accountant advised me I would pay $63,000 in CGT next year had I sold it. My daughter is moving into it when the tenants move out and will be there for 12 months while she builds. I’ll pay the mortgage on it to help her. I am 61, still working, but long hours in retail and commuting mean I plan to go from four to three days very soon. When she moves out of the house, I’ll move in, then do a bit to my house to get it ready to sell. It would probably cost me $700,000 to get a nice unit in about 12 months. I gave $22,000 in one super and $65,000 in another. I just need to know if I’m on the right track. H.H.

It sounds as though you are on top of things. Your accountant may be able to tell you how you can use deductible super contributions to reduce CGT.

I understand you plan to sell both the remaining properties and move into a unit. Make sure you understand how much you will have left after selling the old properties and buying a new one, and how much of this can be placed into super to provide an untaxed income in retirement.

One suggestion is that you could save a lot of buying and selling costs by staying in one of your houses until you retire and hire a cleaner and gardener, they’re cheaper than stamp duty. Then, much later, look to buy an independent living unit in a retirement village with care facilities attached.

My wife (67) and I (81) are trustees of our SMSF. Her 2016 pension balance was $1,888,000 while mine was $375,000. With the upcoming transfer balance cap of $1.6 million, can my wife draw down $300,000 from her account, then give it to me to start a new pension within the SMSF? A.A.

Sorry, being over 65, you cannot make further super contributions.

Your wife’s four choices are (a) do nothing and run an unsegregated fund, using the Tax Office’s option for CGT relief at June 30, (b) rolling over the excess above $1.6m at June 30 into a separate accumulation account within the SMSF, ensuring entirely separate bank accounts and investments, which requires a great deal of operating care, or (c) rolling it over into an external accumulation fund, which I believe to be the simplest option or (d) cashing in the excess and investing it out of super.

Having too much money is a nice problem to have.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Financial Ombudsman, 1300 780 808; pensions, 13 23 00.