Should we sell our investment property to top up our super?

I am a self-employed 58-year-old with a super balance of $280,000. My partner is 56 with $400,000 in super. We own a home valued at around $1.8 million, with a mortgage of $500,000. We have an investment apartment which is valued at $400,000 with a mortgage of $180,000. The rental income covers the mortgage costs but not the strata/rates/land tax etc.

My partner would love to stop working at 60, and I would aim to keep earning as long as possible, but it’s difficult to be certain of my earning capacity beyond the next five years. We have a combined income of around $350,000. Would we be better off selling the apartment to pay down our mortgage? Is there a tax-effective way of putting more into super?

The timing of the sale of the property should depend on its potential and any capital gains tax issues. If you sell it now you are foregoing any future capital gain and will be paying a higher rate of CGT because of your high income.

Provided you feel it is not going to fall in value, a better option may be to defer any sale until you both stop work. You will then be in a lower tax bracket but could still make tax-deductible contributions of up to $30,000 each to reduce the impact of the CGT. Keep in mind that any excess costs on the rental property are tax-deductible which reduces the effect of them.

You have plenty of time and space to move the proceeds of the investment property into superannuation when you do decide to sell. Meanwhile, I suggest salary sacrificing, or making taxable contributions to the limit of $30,000, to boost what your superannuation will be worth when you retire.

If a couple has assets of more than $470,000, do they have to pay the deeming rate on their assets on that amount? Does deeming cut in at above the $470,000 limit?

The purpose of the deeming rates is to provide a universal rate for all financial investments such as cash in the bank, superannuation (from age pension age), managed funds and shares. It does not apply to property or personal items such as cars and caravans.

If the assets test produces the lowest age pension, you are asset-tested and the income test is not relevant to you. The number $470,000 is the point where a pensioner couple starts to lose their pension under the assets test.

Suppose you had assets of $470,000 made up of $420,000 of financial investments and $50,000 in personal assets. The $420,000 would be deemed to be earning $7374 a year, which is way below the cut-off point for the income test of $9672. In that case, the asset test would apply.