Breaching it can have serious consequences, including penalties, non-compliance, and loss of concessional tax treatment. Given super’s protected status, it is unwise for an SMSF to incur costs that could be seen as serving private purposes. The ATO advises that the expense should be paid directly from the SMSF’s bank account, invoices and receipts should be in the fund’s name, records should be retained as evidence, and the deduction claimed only once. These requirements can be harder to meet for trustees’ or directors’ travel but, where satisfied, the costs are technically deductible.
You mention that the deceased’s main residence is exempt from capital gains tax (CGT) for up to two years after death. During that period, the beneficiaries or the estate will not be liable for CGT if the property is sold. My wife and I own our main residence as joint tenants and have one adult, non-dependent son who is nominated to inherit the property upon both our deaths. If, at that time, he moves into the home and makes it his main residence, to what extent would he be liable for CGT – either during his lifetime while living there or if he sells the property?
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If the property is covered by the surviving joint tenant’s main residence exemption at the time of the survivor’s death, your son can transfer the property into his name, and under section 128-15 of the Income Tax Assessment Act 1997, his cost base will be the market value at the date of death. Provided he moves in and makes it his main residence within the two-year period, he can apply his own main residence exemption from that point onward. If he continues living there, any future capital gain should be fully exempt; if he later sells it, only any period during which the home was not his main residence may attract CGT.
There’s plenty of talk about downsizing to boost super, but my question is about upsizing. I am single, own a small unit, and have long expected to receive the full age pension when I turn 67. My finances mean I would pass both the assets and income tests. However, with a sizeable inheritance now coming, I will likely fail both tests and lose eligibility.
So, would Services Australia have a problem with someone in my position using a windfall such as an inheritance to upsize their home and keep the full age pension?
Your home is always exempt for Centrelink purposes, and there is no restriction on moving from one property to another, even if the new property is more expensive. Just be aware that moving can involve substantial costs, especially stamp duty and sales commission, which could more than wipe out any pension – or pension increase – you might gain. But, at your stage of life, lifestyle is the most important factor, and if moving will give you a better lifestyle as well as some pension, then go for it.
Noel Whittaker is author of Retirement Made Simple and other books on personal finance.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.
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