What would you do with $300k?

This is definitely a trick/tricky question!

My father is disheartened with the current returns and fees eating his super (120k remaining).

In the next year or two, He is going to sell a property and receive about $300k cash and also end up with owning one of the units on a 4 unit development built on that block. He plans to live in this property as his PPOR and rent out the property below.

He also owns a 1br unit ($300k) currently PPOR.

He wants to invest the 300k in property, he has seen my success with IP and wants in. Now, I know it may not be the best for me tax wise, but I would like to somehow utilise this money to give him an income from somewhere, other than a term deposit.

I had the idea that his money can be put towards my next property purchase, and he could receive the rent.

Next idea, I have to start paying down the $143k debt I have for my first IP, maybe he could receive the rent from that (it is positive geared so just costing me tax) if I used a portion of his 300k to clear that debt.

We have the safe option of earning interest @ 3.7% (on $300k) for a savings account and that would only be $11k per year.

I'd like to get him as higher return as possible, but he wants to have as much pension as possible (he currently receives about $530 p/fn).

Whatever happens, I'd like to set up another account in my name, which I transfer the rent into, and from which my father withdraws as he pleases to supplement his pension and the rent from the 1br.
I don't want centerlink to reduce his pension further from the income generated from his investment.

The only thing is how do I get the $300k from his account to my account without centerlink and the ATO finding out!!??

I am on a high from seeing our accountant and am in full swing to buy our 3rd IP in the next few weeks, I have LOC with $340k waiting to put deposit/s down for the next IP's and maybe I can use this somehow to help dad out, not sure in what way if any?

All suggestions welcome, thanking you kindly

 

Sounds like fraud to me

 

Fraud, what's that?

 

Really, for the hassle of owning property for someone who is already retired, I'd be looking at a simple portfolio of higher-yielding shares. Lower entry costs, no tenants/management fees, and potential "bonus" from franking credits. Volatility in share price won't impact yield much if business fundamentals are good.

The main reason I became interested in property was due to the huge leverage advantage it has. If you're not borrowing to invest, or if you're not developing (manufacturing value), I don't see property as an attractive prospect.

Have you factored CGT on the proceeds of sale of the dev site? That might take a chunk out of that $300k.

 

I think what was meant by Nemo was that putting your father's assets under your name so Centrelink doesn't notice the income would be fraud.

I really can't see why you are trying so hard with this - and venturing into dodgy waters.

If you really want to help your father, when his super runs out, just get him to reverse mortgage his property. By that stage,it will have increased in value anyway.

If you want to use his money for your projects, that's another matter, but the two things are separate...

 

@Phase2 I have noted no CGT payable as purchased before 1982.
I agree, leverage is key for a sustainable and expanding portfolio.
Dad's "business fundamentals" are potentially flawed and so with great risk and ignorance we would go down that path. We have lost faith in the financial guy that looks after the super fund. Dad just wants what he wants and damn-it, he's 73 and who knows whenhe will kick the bucket, I just try to fulfill his wishes, as much as I can, within his own obserdity.

Not sure what to do as dad currenrly has 7% growth, and takes a monthly income from the super of $3000. Only 25% of this is made up of growth, the remaining 75% is taken directly from capital. Dad is not happy with his super reducing by 36k every year without a decent growth % to bolster the capital.

I am looking into Open corp development fund, offering 20% return for 2-3years investment.

I am buying my second property through this company and looking at their past success, I am confident it will be a stable investment for me and for my father.

 

At this age his Super should most likely be in the safest of categories which don't have much growth but very very little risk. With the amount his has in there it will continue to go down as he draws on it as it is not large enough to grow enough to counter balance the $3000 a month.

I would take him to see an accountant and/or financial advisor who can outline a few scenarios such as
- put the proceeds of the asset sales into his SMSF so it's growth is enough to cover his pension
- invest the money into an IP and he lives off his current pension and the rent.

I am going to be harsh here but 73yo should not enter into high risk high yield investments. The way you invest for yourself is totally different to how you should invest for your father

 

BTW the money that is coming to him will greatly affect his pension. You should talk to one of the advisors at Centrelink now about what will happen.

 

@Joynz Dad refuses reverse mortgage at this stage, all I can assume is he wants to save his unit as my inheritance.
@Joynz Although my dads life savings do look rather tempting I am not one bit bothered whether it ends up with me or down at the pokies (he's not like that though).
Part of me is totally joking with this fraud, I don't want to go to jail, but it's so hard to constantly hear my dad ramble on about how he "is entitled to as much of the pension as he can get" and not be a little bias (or brainwashed perhaps) That is why I have gone "dodgy" and I will again broach the reverse mortgage with him when his cash runs out in a few years time!

I genuinely want the BEST for him, and the way I do that is to try and gather as much information from credible sources, including forums such as this one, filled with people who have diverse opinions, and maybe things I had never thought of existed, could be the option that I need to help my dad.
I hope that any ideas/suggestions put forward via members I must do my due diligence and take a closer look before going ahead.

I will have to do the sums on putting his money into an investment property, as he did need part of that 300k liquid for living expenses, at least it would last him another 7-8 years if it were in a term deposit.

 

I'm a confused.

Your Dad has a unit and a large block in Croyden. Why can he only access $300,000?

When his super runs out, he should be able to reverse mortgage the Croyden block. At the land size mentioned, the available money will be more than enough for his needs.

I assume a block of land can be reverse mortgaged too? He can get a monthly or fortnightly payment.

If he is unwilling to do this, he could try living on less than $3,000 a month to stretch his super further.

Or just sell the large block. He should net around $800,000 with no cgt. More than enough to live comfortably and leave some for you too.

If his super fees are very high, could he transfer into an industry super fund for lower fees?

Anyway, he has more than enough assets to live comfortably without doing anything risky like high risk developments or Centrelink fraud.

(Note that agencies can and do cross check with each other to catch fraud)

 

As far as I can tell @Joynz the Croydon site will be developed and he will end up holding one end product mortgage free and make that his PPOR and sell his current PPOR which is worth $300k and that is where the $300k is coming from.

I don't actually understand how the Croydon project will work out that way but I'm assuming there is another thread which accounts for tax, GST, CGT etc.

I've just realised that he's drawing $3k plus getting $1.2 k pension per month. I'm not judging (ok maybe a little bit) but $4.2k tax free with no mortgages etc is a lot of money. That's $50k a year or equivalent to a $70k job.

 

I don't think he is getting the pension now - though could be wrong?

To already own a large block of land in Croydon and a unit and then to only end up with $300,000 cash in hand no block and a different unit seems like a loss not a gain when he could sell the block and get more than double the cash.

He could also reverse mortgage the block, get a really good income and keep the unit he currently lives in.

 

Agreed.

Developing the Croydon block will also turn a pre 83 CGT asset into a CGT event if I'm not mistaken.

 

Sorry but that is wrong. If your dad develops and sells the new buildings/lots, he will be liable for CGT on the new buildings and land improvements. CGT won't apply to the lots themselves as they were acquired before 1985.

See here for ATO's example.