Doomed to rent forever

My situation is that a very long time ago I went for a National Australia Bank dividend reinvestment scheme for a couple of years or so. The dividends, of course, came six-monthly, but NAB did not issue scrip certificates until 100 shares had been issued. So, as you can imagine, everything was at sixes and sevens and I cancelled the dividend reinvestment after not very long, before it drove me mad. Then, after I thought I had got that monkey off my back, they actually paid a scrip dividend! I keep good records but some day my unfortunate children will have to deal with this, and two of the three know absolutely nothing about dealing with shares, so I would appreciate your help.

It is not nearly as complex as it used to be, because indexation for inflation is no longer relevant. Therefore, any shares you own are simply split between those bought before September 1985 and those bought after that date. As a result, you only need a record of what they cost and this is very easily kept by your accountant. Also, the share registries these days keep very good records.

I am 63 and my wife is 18 months younger than me. I recently received advice designed to maximise my age pension entitlement during the 18 months in which my wife will not be eligible to receive the pension. The advice is twofold: 1; to withdraw the majority of the funds in my account-based pension and transfer it into my wife's superannuation in order to reduce the value of the assets declared to Centrelink; and 2; take the minimum amount from my account-based pension as a pension and take additional amounts as a lump sum. This is to reduce the income that I need to declare to Centrelink. Is this sound advice?

This sounds basically correct to me. Money in superannuation is not counted until the owner reaches pensionable age, so any money held in your wife's superannuation account will not be assessed by Centrelink until she reaches pensionable age. Income streams from superannuation are assessed under a complex formula that takes into account your life expectancy. Your adviser will be able to do the sums for you.

I am 57, retrenched, with no job. I live in a house worth $400,000 and have a unit worth $500,000, which provides weekly income of $450. I have no debts but I am struggling with rates and body corp etc. What is my best strategy option to maximise my income now, and when I've turned 60?

You have highlighted the problems that can occur when all your investment funds are tied up in an illiquid asset. This would not be a problem if all your money were in shares, because you could sell them bit by bit as needed. Unless you can find some work, your only realistic option is to sell the investment property and then seek advice about putting the funds into a diversified portfolio, which would provide both income and growth.

I am a single-income earner with savings of almost $200,000. I have been putting money into term-deposit and high-interest accounts. My current income is $60,000, including super. During tax time, I have to always pay back due to interest earned on savings. Every quarter I also make pay-as-you-go payments. Is there an efficient way that I could minimise tax?

You really need to take advice because a range of options is available to you. Depending on your age, you could put a chunk of your money into super, or you could invest in Australian shares paying franked dividends, which would be tax-free for a person in your tax bracket, or you could talk to your employer about salary sacrifice. Every strategy has advantages and disadvantages and you will need to ensure you understand what they are.

My girlfriend and I are young (26 and 30, respectively), have a healthy income, a small amount of shares, and we can save quickly and easily. Given the high mortgage interest costs, with little principal repaid within five years, we are considering renting forever and investing in the sharemarket instead. Are we doomed if we never get into property, as advised by friends and family?

In most cases it's cheaper to rent than to own, but this does not work well for most Australians, as they never get around to saving the difference. In Australia there is a mindset that property is the only way to go, and this is why you will be bombarded with advice to buy, coming from those around you. You sound like highly disciplined people and will probably do very well by renting and investing, as opposed to buying a home and paying off the mortgage. However, it would be wise to watch the property market carefully, and buy if and when you see a boom coming.

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. Email: noelwhit@gmail.com.

The story Doomed to rent forever first appeared on The Sydney Morning Herald.

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