Transitioning to retirement

Agree with above. This person has been overly generous and in so doing has created a problem for herself. She could have retired quite nicely - and maybe still can - if she could get the PPOR where it belongs and sell one of her properties. The kids can get it when she drops off the perch. Until then, she'll be needing it.
I do think she'd be better off selling one of the places. Sentimental value, yes - but it can create barriers and delusions. Getting old, needing care, etc are realities we have to face as we get older.

 

Yep and to be blunt it's not tax payers responsibility to ensure this family's ability to retain a sentimental asset.

 

They should have gifted the holiday house to family they're sentimentally holding onto it for and left their PPOR as the PPOR and they would pass the assets testing and stay where they are on full Pension. The legal and moral correct path.

 

Paying tax doesn't mean you entitled to get it back in retirement.

The governments attitude would be they can afford to live of equity. They have manipulated their circumstances now to avoid this.

i manipulate my circumstances every year and pay less tax as a result through the use of trusts and bucket companies. Though this is a deferral not an avoidance. I have however been more creative in the past which is why I saiD I wasn't necessarily fit to Throw stones.

 

Which is fine. The holiday house can become the PPOR.

The other option would have been to sell PPOR and put a mcmansion on the Holiday house block, but would anyone consider that immoral? Or simply enjoying retirement?

 

Is the holiday house anywhere near the rest of the family though?

 

I'm with @Sonamic. Wrong house gifted - if Holiday Home sentimental value then it should have been gifted to the family members that would have received it next. I'm very sceptical of the legal advice obtained and protection provided for 'gifting' the house to a relative - that can end VERY badly. In fact I have 2 tenants (in different properties) that are approaching their 70s and still working because their kids took advantage of them (went guarantor on their kids homes/businesses) and they lost everything. One of my grandmothers is a self funded retiree, has never taken a cent of government money, made money from subdivisions, selling her PPOR to move into retirement village, she says she won't have anything left to gift to the family at the end, some of her kids aren't too happy, as a grandchild I'm just proud she did it off her own steam. Other grandma, sold her PPOR to pay for her home in the retirement village, single on the aged pension, she died and managed to save $20k on the aged pension. I'm not seeing the big drama, biggest issue is deterioration in health and requiring medical care. What is the person that has received the PPOR doing to help??

 

About 45 minutes away. Not an issue while they are in good health but if that changes....

Also I think the point is being missed - if this person is financially better off being self sufficient - no aged pension - they will go down the grannt flat build path and live with relatives. The issue with this is the debt it creates and how much of the rent that will eat up.

Edit: The old PPOR is 1.5 hours away from family, holiday house is far closer.

 

Unfortunately she's ballsed it up for herself and locked herself out of the pension for several years.

As the two properties are of similar value have the relative resell her the old ppor and her transfer the holiday home in return. Yes, someone will need to pay stamp duty on both transactions (possibly the person benefitting the most).

She'll have the exempt ppor back and asset test free. Holiday home back where it should have gone. How this gets around the previous gifting - who knows but it won't be worse than present.

Or vary the above for a gf and sell the holiday home as before (as tailored vendor finance eg mortgaged), still fall under the assets test. Mortgage payment equating to the rental on the gf.

 

I can't see any objection to this. Being able to afford to live in $1m+ house on the pension would be difficult though. A baked beans diet that's for sure.

 

They will provide life long financial and health support so the person can live comfortably.

 

Transferring the holiday house could result in a large CGT bill as well.

 

I've seen this end badly when the person eventually needs to go into care.

Other relatives (who may also be be beneficiaries) perceive that one relative got everything unfairly.

I have no problem with structuring yourself well to obtain maximum benefit in retirement.

My dad is in a similar position - was self employed his entire life and has no super. He is asset rich but cash flow poor. He worked til his late 60's and my stepmother 70. Annoys the hell out him that people who have never paid tax here can access the pension but he can't. He's recently sold an asset and restructured to put himself in a better position. Still can't get the pension but at least now they have a paid off PPOR.

 

I would suggest consulting a financial planner. I'm a bit rusty on the pension rules as I've been out of it for so long (10+ years). They will be able to help with structuring for the pension. This is their bread and butter so to speak, I got out of it because I didn't like the 'salesy' side of things with selling managed funds, the under the table kick backs (before the rules came in) however structuring debt and assets, aged pensions, wealth creation for retirement is where they can really help. They would be able to work out each option, cost etc and make recommendations for the best course of action.

 

If they gifted their PPOR to the family they intend to live with, wouldn't that give them a granny flat interest rather than it being considered a disposal? From my very limited understanding, a granny flat interest from a payment of that size would leave them being treated as a home owner, with the asset not being part off the assets test - and it wouldn't deny them the pension for five (four more) years, as it wouldn't be considered a disposal while they still lived there.

Of maybe I just don't understand the granny flat interest rules...

 

Retire on 30 June. Enter contract of sale 1 July ie sub-$18k income for the year & zero capital gains payable.

 

We really aren't sure. Have tried to look at granny flat rules, lifelong tennant rules etc. but it is such a complex system of assessment.

 

I agree with Nemo, I work with the aged, and I would like a dollar for every family member who reneges on what the aged person thought was a done deal. Even providing lifelong support is not as it sounds and believe me, caring for an aged person is not easy, we often discuss at work the amount of people we see who do it for purely financial reasons, whether that is the asset, or the carer pension and many associated benefits. This almost always results in a bad outcome for the aged or impaired person, we wish we could lodge SAT applications to compel some aged people into residential care as their supposed loved ones are NOT doing the right thing. Unfortunately, I have even seen this in my own family, with one spouse cancelling care for the other and yet not providing appropriate care, for whatever reasons. It is hard, hard work and often, this fact is lost in the sentimentality and obligation.
I am not suggesting for a moment this is the intent of your family members, however, when living at home is no longer possible, or optimum, things can get very unpleasant.

 

As a side issue, there was an asset protection element to the transfer of PPOR to do with legal challenges to inheritance.

 

@Nemo30 @moridog

Caring for an ageing relative can be very hard particularly when they require around the clock care. I don't really understand the ins and outs but I know both of my grandmothers had to pay to get into their places on the independent living level and as they became less independent they were progressively moved up in the care facility with the cost increase only being their weekly payment as they had already paid their lump sum to be there. At the start I thought why can't their kids look after them, but as their care requirements increased I started to understand the pressure it can put families under. I have many funny anecdotes from my Nanna's nursing home but also there are some harsh realities that the average person wouldn't be able to handle or cope with.