My grandson wants to invest. What is the best way to do it?

If the house is subject to CGT, be sure to use a tax accountant. There is a lot of money involved and it is best to seek help when it comes to complex financial matters.

I am 58 years old and my husband is 60. We stopped working when the pandemic started, although my husband may return to work in the future. We own our $2.5 million home with a $1.4 million mortgage and $365,000 in a mortgage clearing account. We also have a residential investment property valued at $2 million, with a $1 million mortgage and generating income of about $45,000 a year. We are considering selling the investment property, but are concerned about the possible CGT. It used to be our main place of residence, since we built the house in 2006, when it was worth about $750,000. We lived there for about 10 years and when we moved in it was worth $1.3 million. The property has now been rented out for six years. If we sell it, what is the most effective use of the money? We have other property, including $700,000 in mortgages, but insignificant amounts in our retirement accounts. CW

If a person moves out of their home, they can rent it for up to six years and sell it without being subject to CGT, as long as they do not claim another home as their primary residence.

Consequently, you may be able to designate what is now your investment property as your primary residence. This would mean that your current home, when you finally sell it, would be subject to CGT, calculated proportionally, based on the first six years in which it was not your main resistance (2016-2022) and the rest of the time (2022 to whenever ) when it was their primary residence.

Use a tax accountant to help minimize CGT.


If, after much consideration, you decide that your former home was no longer your primary residence when you began renting it in 2016, you are considered to have purchased it at that time. His CGT cost base would be $1.3 million, the value of him at the time.

Suppose you could increase the cost basis by $150,000, using the unclaimed expenses as a tax deduction, along with the cost of sale. This would mean that you could have a capital gain of $690,000 ($2 million less $1.45 million), half of which would be subject to CGT.

If the taxes are, say, about $140,000, you should walk away with about $1.86 million.

Then, you could talk to your lender about reorganizing your mortgages so you can pay off your non-deductible home mortgage first.

Then each of you could make tax-deductible contributions in excess of $27,500, which could lower your tax.

So I would put the roughly $770,000 into your investment mortgages. A retired couple is better off with minimal debt at a time of rising interest rates.

If you have a question for George Cochrane, please send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. All letters have been answered. Helplines: Australian Financial Complaints Authority, 1800 931 678; Centrelink Pensions 13 23 00.

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