Question 1: My wife and I each have just over $1.4m in our SMSF. We are both 64 years old, retired and in pension mode. I have read that we both could add non-deductible contributions of $200,000 each this financial year, using the bring forward contribution rule. I wanted to know if this is true?  Also, what happens to the amount that goes over the $1.6 million cap? Would we have to move this back into the accumulation phase?

Answer: Yes, if your total superannuation balance is between $1.4m and $1.5m, you are under 65, and you haven’t made any material non-concessional contributions over the previous year, you can access the bring forward rule and contribute up to $200,000 into super (from your own monies). The age limit will be increased to 67 years (under current Government plans) from FY21.

All super contributions are made to an accumulation account.

You can then roll-over to your pension account (commence a new pension) with any amount, provided you haven’t exceeded your lifetime transfer balance cap of $1.6m. For example, if your transfer balance cap is currently $1.45m, you would only be able to move $150,000 into pension – the balance of $50,000 would stay in the accumulation account, where earnings would be taxed at 15% pa.

Question 2: Thanks for the article on investing for kids. Not sure if you are aware of this but CommSec has recently launched CommSec Pocket. Whilst they only offer 7 good ETF’s (like IVV, IOO, NDQ, IOZ and SYI), these are a safe and well diversified way for kids (or a beginner) to get started. And best of all, the brokerage is only $2 instead of $20 for trades under $1,000. I don’t have any affiliation or love for CBA , but I do think it’s the best option out there right now for small trades.

Answer: Yes, CommSec’s Pocket is an easy and inexpensive way to invest very small amounts and potentially suitable for kids and grandkids. You do have to have a CBA bank account in the same name, which depending on the age of the child, may cause some issues.

Question 3: I note that a number of listed REITS (real estate investment trusts) also manage  unlisted property funds. Apart from the ability to put smaller amounts into listed REITs and greater liquidity, but possibly more price volatility, are there any significant differences, especially risks, if looking at the larger managers e.g. Centuria, AMP, Cromwell etc?

Answer: The two main risks with unlisted property funds are (generally) single asset risk (less diversification), and the exit plan. How does the Fund deliver a liquidity event for its unitholders? The latter obviously comes down to the quality of the building, tenant profile, and marketability.

I think that when looking at these funds, the most important thing to consider is the manager’s strategy to improve the value of the building and/or why that building will improve in value due to its location/market factors. I am a big fan of these funds but there are also a lot of costs (including stamp duty) to be recovered before you will derive a positive capital return.