Question: What are your thoughts on unlisted property trusts? Are they better value than listed trusts trading above net present value (NPV)?
Answer (By Paul Rickard): Potentially – yes – but it will depend on the property. The major problem with unlisted trusts is the lack of liquidity and getting your money back. You need to understand the manager’s plan to terminate the trust and assess how realistic this plan is.
In regard to buying listed trusts above their NPV, I would be fairly mindful of this, particularly in the current commercial property environment. While listed property trusts have done well this year due to the “thirst for yield”, the commercial property market is arguably in oversupply and the outlook is mixed.
Question 2: Would you please tell me the SMSF rules for the percentage that you have to spend annually when in pension phase. I am 67 years old and as I am back working – running my consulting business – I wonder if I am allowed to make payments into my SMSF and what the annual limits are. Also, are there any benefits in doing that at my age?
Answer (By Paul Rickard): If you are taking a pension and were aged 65 years or over at the start of the year (and under 74), you must take out at least 5% of your super balance as a pension. For example, if your account balance was $500,000 on 1 July 2013, you would need (at age 67) to withdraw at least $25,000 as a pension during the year.
Provided you meet the work test (more than 40 hours over any one consecutive 30-day period during the year) you can continue to make contributions at age 67.
The concessional cap for a person aged 60 or over is $35,000 (compulsory 9.25%, salary sacrifice or if self employed, an amount you claim a tax deduction for); non-concessional cap (personal contributions) cap is $150,000.
Yes there are advantages at your age. It gets the money into a more tax effective environment – if you make contributions and then commence taking a pension, the investment earnings will be taxed at 0%.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
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Also in the Switzer Super Report:
- Charlie Aitken: Qantas is not going broke – target $2
- Gary Stone: My SMSF – a blessing in disguise
- Staff Reporter: Buy, Sell, Hold – what the brokers say
- Roger Monthomery: AMCOM – reaching for the clouds
- Margaret Lomas: Property and the end of financial year – a guide to your deductions in your SMSF
- Tony Negline: Everything you need to know about the Seniors Health Card
