I am set to inherit a one third share in a property worth $1.2 million. My two brothers,want to rent the property out,and then use the equity to buy land and build houses to sell. They are both builders by trade.I am 41 and earn $115,000. My partner earns $55,000. We have a 6-year-old and owe $340,000 on our home. I have $208,000 in super and plan to retire at 60 or earlier if possible. My partner has $200,000 in super. We have an investment property that we owe $550,000 on. It is tenanted but with interest rates going up,the repayments are starting to really be felt.
I am in two minds. If we sell the property and I get my third of the proceeds,we could be mortgage free,which appeals. But am I thinking too short term? Should I be building wealth through property development with my brothers?
Building a property portfolio can be a lucrative option,but only if you’re willing to take on the required risks.Simon Letch
These are two very different potential pathways. One has you going into business with your brothers,using the inherited property as the seed capital for this venture. Any business has risk,however the flip side of that risk is the potential reward. You therefore need to evaluate your comfort around being a one third shareholder in a property development business run by your brothers.
If this doesn’t sit well with you,ask your brothers to buy you out. They could obtain a loan for $400,000 against the property,which the rent should comfortably cover,and you could cash out. There would still be plenty of equity in the property that they could use for property development if they wish. Your decision therefore does not hinder their ambitions necessarily.
I am 60 and intend to retire at 65,however my partner is only 43 and will continue to work for at least another 17 years. She currently earns $60,000 however this is likely to increase significantly soon when she changes her work arrangements. My projected super balance at 65 would be around $600,000 which is my only asset. Our home is debt free and in my partner’s name.When I become eligible for the age pension at 67,will my partner’s income be included in the means test?
I’ve had several people ask variations on this question. You’ve highlighted an interesting wrinkle in the pension system. There is an assumption that couples share all their finances. Frequently,in my experience,that is not the case,especially for those on second marriages,or who formed their relationship later in life. At the very least most people want some degree of financial independence.
Once you reach age 67 and are retired,Centrelink will assume that you and your wife will live off your wife’s income whilst she continues to work. You are assessed under means testing as a couple.
With regards the asset test,your wife’s superannuation savings are not included in the calculation given these are inaccessible. Sometimes this can provide us with a strategy option.
However,in your case the problem is the income test rather than the asset test,and aside from the “nuclear” option of the two of you separating so that you are assessed as a single person rather than as part of a couple,I’m unaware of any work arounds here.
Your superannuation savings will provide an income stream of around $30,000 per year,so hopefully this is enough to give you the independence you seek.
Paul Benson is a,and host of the Financial Autonomy podcast. Send your questions to:
For expert tips on how to save,invest and make the most of your money,delivered to your inbox every Sunday,