Ask Noel: Income from granny flat counted as asset?

Ask Noel: Income from granny flat counted as asset?

I am a single woman currently planning for my retirement in four years and have considered building a granny flat at the back of my home. It could be used to provide accommodation for my son who would assist me as I get older, or alternatively provide me with rental income for financial security. My super is only $220,000. Can you advise if this will be assessed by Centrelink as an asset? I would like to keep my options open as I am not ready to downsize yet.

A departmental spokesperson says if an income support recipient’s home includes a separate self-contained dwelling and the self-contained dwelling is rented to a person other than a near relative, the self-contained dwelling is not counted as part of the principal home. This means the net market value of the self-contained dwelling will be assessed as an asset under the assets test.

Any rental income received would be counted as income, with certain deductions allowed. Deductions may include agent’s fees, repairs, land and water rates and interest on related loans in some circumstances.

But you may be OK – if the self-contained dwelling is rented to a near relative, that is a parent, child or sibling, the principal home and the self-contained dwelling would continue to be exempt from the assets test.

I own a company and pay myself $90,000 a year plus 9.5 per cent super. Can I get my company to pay me $90,000 plus $25,000 super instead of just 9.5 per cent?

Total concessional contributions from all sources cannot exceed $25,000 a year. Therefore, your company could increase its contribution to $25,000 a year, which would mean of course that you would not be allowed to make any more concessional contributions in that year.

I have a small loan of $50,000 on an investment property that is valued at $435,000. I receive rental income of $500 per week clear so my interest is minimal. I also have another investment property which I owe a fair bit on. They are both at the same interest rate, but the bigger loan has an offset against it. I would like to own the first property and since I’m looking at refinancing thought I could use the money in the offset to pay off the small debt. It’s a peace of mind issue to know that I would own my property and another.

It would be a simple matter to withdraw the money from the offset account and use it to pay off the small loan on the first investment property. But you would lose flexibility. If you are after peace of mind you could take comfort in the knowledge that there are funds in the offset account to liquidate the loan on the investment property at any time you wished.

I have now just qualified for a minimum age pension after being cut off in January 2017. The problem I have is that the latest asset test changes from July 1 have increased the qualification for a part pension to $844,000 for someone in my situation. With the taper rate remaining the same, how does this translate into an increased pension payment over time? Does it mean that more people qualify, but will only ever receive a minimum pension?

As time passes, the cut-off point for a part pension should gradually increase, and you may well find that your assets will gradually reduce if your expenditure exceeds your total income. Therefore, your pension may increase as your assets fall. I guess the big worry for anybody who is receiving a pension now is what would happen if future governments tighten the pension rules still further – this is not unlikely. But, under the existing rules, more and more people should begin to qualify for a minimum pension as the cut-off points are slowly increased.

I bought a residential property last year and have funds sitting in the offset account to lower my mortgage interest each month. However, recently I started buying shares, and this has reduced my funds to offset my mortgage and I am paying a larger mortgage interest each month. Would the money that goes to buying the shares be tax deductible? Could you advise how I should go about structuring it?

The name of the game is to maximise your deductible debt, and minimise your non-deductible debt. Your current strategy is the opposite to that because you are using funds which could reduce your non-deductible debt to buy income producing assets. Money spent to buy shares is not of itself tax-deductible, but interest on a loan to buy shares is. The simplest method would be to take out a home equity loan to borrow for the shares you wish to buy.

  • Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance.