The bank wants me to combine my home loans. Should I?

I owe $240,000 on my home and have just received approval for $600,000 for investment property. The bank has suggested we lump the loans together to $840,000, but we do not think this is the right thing. Your opinion would be welcome. I am 59 and would prefer to pay off my home loan as soon as possible.

It appears you are smarter than the bank. Because the interest on the investment loan will be tax-deductible, it’s important that you keep the loans strictly separate. Try to have the investment loan interest only if possible, to minimise your repayments and maximise your tax deductions. This should leave you with the maximum cash available to boost the repayments on your non-deductible home loan.

The bank wants us to package our home loan with our investment loan, is that wise?Credit:Simon Letch

My 100-year-old mum moved into aged care in August 2021. She paid her Refundable Accommodation Deposit (RAD) of $550,000 (her children lent her about 60 per cent of that) and she has a part-age pension of about $10,000 per year, a superannuation pension of $14,000, and $400,000 of investments with income of $8,000. Her home is not assessed for her aged care costs until August 2023. We think it is not worth selling her home before then because, although she will pay higher aged care fees, she will need to pay the annual cap on aged care costs whether she sells the house or not. We calculate that she will reach her lifetime cap about 20 months after August 2023. She is physically well and has a reasonable probability of surviving past April 2025. We can lend her money for the increased aged care costs from August 2023 until April 2025. We would prefer not to sell her home in the current weak property market and lose her age pension as well. Is this a viable plan or are there other factors we have not considered?

Aged Care Guru Rachel Lane says your mother’s home is included in her aged care assets from the day she moves in (unless a protected person lives there) up to a capped value of $186,331. This remains the case for as long as she keeps the home. Any amount she pays towards her RAD, including money that has been lent from the children, is also included in her aged care assessable assets.

The treatment is different for her pension, the home is an exempt asset for 2 years from the date your mother (or her partner, whichever is later) moved out. After the two-year exemption, she is treated as a non-homeowner (which gives a higher asset test threshold and cut-off point) but her home is included in her pension assets. The RAD is an exempt asset for her pension.

Assume her home is worth more than $450,000. After the two-year exemption her age pension will be reduced to zero, but her aged care fees may drop a little. Without knowing the value of the home it is impossible to say what the effect on her aged care costs would be if it was sold. Whether she keeps or sells her home has far more wide-ranging consequences than her pension and cost of care. You should seek advice about that and what to do about the loan from her children and her investments.

Recently, you wrote that if I have an investment property with a capital gain tax liability and I make that property my main residence before I die, and it is my main residence when I die, then the CGT I had accumulated in my life would be forgiven and forgotten and my heirs would not be liable for the CGT I had accumulated. To have two different treatments of accumulated CGT on death are counter-intuitive, and I am asking if I have missed something here in my interpretation?

Julia Hartman of Bantacs tells me that it is a quirk in the legislation – the carve-out for the deceased’s home is just a blanket cost base of the market value at the date of death. See Section 128-15 ITAA 1997. It is unique to assets that can qualify for the main residence exemption.

I am almost 75 and returning to work. Is it correct I can’t make any form of voluntary contribution to super beyond one month after I turn 75? Does my employer have to pay super, and can I salary sacrifice to super? I have $1.6 million in super in pension mode.

Voluntary personal superannuation contributions, which include salary sacrifice contributions, cannot be accepted by a superannuation fund after 28 days from the end of the month in which the person turns 75. The only personal contribution you can make after age 75 is a downsizer contribution.

Your employer can still make “mandated” employer contributions beyond age 75, which include contributions made under a law or industrial agreement, including superannuation guarantee contributions.

  • 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 own personal circumstances before making any financial decisions.

Noel Whittaker is the author of Retirement Made Simple and numerous other books on personal finance. Email: [email protected]

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