Selling the house is added dilemma in aged-care puzzle

If we start renting the house out after she enters aged care, when does the house become subject to capital gains tax (CGT)? Does it start from the date she moves into care, the date it becomes income producing and earning rent, or is there a period it is exempt?

We are required to pay a deposit of $370,000. We can only pay in part if we keep the house. If I lend mum some money what are the implications of this for the purposes of aged-care fees and pension payments?

The decision to keep and rent or sell the former home is the biggest decision most families face and I can't stress enough the need to get financial advice. As you have rightly pointed out there are potential CGT consequences when the house is sold in the future and there are also potential income tax consequences on the rent itself.

For pension purposes the home has a two-year asset exemption but any rent will be assessed under the income test. For aged-care purposes, the house value will be included in your mother's assets up to a capped value of $162,815 and the rent will also be included in the aged-care means test.

If you pay money towards her refundable accommodation deposit (RAD) it will reduce the daily accommodation payment, which is calculated at 5.7 per cent of the unpaid RAD but the RAD is assessable in the aged-care means test so her means-tested care fee will likely go up - offsetting some of the benefit. The RAD is exempt for pension purposes.

The scenario you propose has a lot of moving parts: tax, pension, aged-care costs, cash flow and estate planning. You need to get advice.

My wife is 30, I am 37, and our combined income is $350,000 a year. We own outright a house worth $800,000, and have no other investments apart from combined super of $175,000 to which we salary sacrifice the maximum each year. We save $8000 each month.

To diversify our investments and take advantage of negative gearing, we plan to borrow and start a share portfolio. We understand the risks of a downturn in the sharemarket, and our adviser suggests we use an interest-only loan. Should we use our $8000-a-month savings to reduce our investment loan, or look at an education bond for our son?

People say that investing in the sharemarket outperforms all other avenues in the long term - do you agree?

I do agree that the sharemarket is the best investment, and there are a range of options available to you. One scenario would be to take an interest-only loan with an offset account attached and bank your spare money into the offset account. Then, as time passes, you could decide whether to use that money to reduce the investment loan, or to invest in investment bonds for your son.

For tax-minimisation purposes, I would prefer you keep the loan value high as long as you have a good safety buffer, but the main consideration should be to avoid any situation where you could be forced to dump shares if the market has one of its normal downturns. This is why reinvesting all dividends is a good strategy.

I suggest you go to my website and look at the stock exchange calculator. It enables you to enter a hypothetical sum at a date of your choosing, and find out what the amount would have grown to at a date you can nominate if performance had matched the All Ordinaries Accumulation Index, which includes income as well as growth. This will allow you to model any scenarios you choose.

I am 82, my wife 81 with a degenerative condition having a short life expectancy. We both receive part age pension. Our combined assets total $780,000 made up of $300,000 in a deeming account and shares. Our wills leave all to the surviving spouse, if spouse lives more than a month after deceased's death. My wife's will bequeaths $240,000, to be split equally among our three adult children, remainder to me as above. Will those bequests count as "gifts" for Centrelink pension asset test, as that would leave me disqualified for part pension?

Assets that are bequeathed are not regarded as gifts by Centrelink. Therefore there should be no adverse effects on the pension of the survivor.

We have an investment property in our self-managed super fund, which receives $350 a week in rent. While we are renovating our principal place of residence, could we, for a few months, rent the investment property ourselves? We propose to pay the same rent we would receive via an arm's length arrangement?

The superannuation rules are quite clear on this. You cannot rent the place to yourselves.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice before making decisions. Twitter: @noelwhittaker