Welcome to the Money Puzzle.

I'm your host, Julianne Sprague, Wealth editor at The Australian.

I'm filling in for James Kirby, who is on a well deserved break, and today's guest Jason Featherby.

He is the co founder and head of financial advice at Lure and Wealth.

He's got more than twenty five years experience in the industry.

He is a friend of the Australian.

He does write for the Dollars and Cents column, providing practical tips and guidance for people navigating the complexities of managing their money.

And Jason, Welcome to the Money Puzzle.

Hi, Jules.

Great to be on, first time podcaster, time podcaster.

Thanks so yeah, very excited.

Couldn't sleep last night.

It's like Christmas.

You could join us.

We'll cover a bit of ground today.

But I wanted to chat to you for the Money Puzzle because a recent column you did, this Dollars and Cents column I mentioned that runs in The Australian.

It's an advice colin.

People put their questions.

And we try and give them a bit of guidance and some general advice.

Yeah, and so one question in particular I thought was one that many people are grappling with at the moment.

It is around gifting to family and what the tax implications might be.

We are in the midst of an intergenerational wealth transfer, and lots of parents, lots of grandparents, they're thinking about this idea that they want to be able to help their kids or their grandkids.

Definitely, and they want to do it while they're alive, because there's joy in seeing the benefits that money transfer.

Yeah, absolutely, And I think they read the news and watch the news and think, well, their grandkids or their kids are going to find it.

It's so difficult to buy a property now that they do want to help.

And I reckon that it's taken over as the most commonly asked question of a financial advice.

It used to be how much money do I need to retire?

And now it is how do I help my kids into a house?

And it's property prices, that is that the property prices have hit fresh records this week.

People are very concerned about that.

But for this column, it was Karen who wrote in about she owned a city residence and her daughter currently occupies that rent free.

Wow.

Oh yeah, no, not bad.

There's a property you don't even have to live with mum or dad and you're getting it for free.

That's a whole other debate.

But Karen said that her daughter would inherit the property on her desk, So the plan is always that her daughter was going to have this property.

So now Karen is thinking about gifting this property.

You know, her daughter's living there rent free.

Anyway, I think she's thinking, why not, no's gifted.

It sounds like such a lovely thing to do.

It's such a simple thing to do.

It would seem so simple.

And Jason and I would think about this, and if I own my property with my husband, tell her and a bit of the bank, and the bank owns it a little bit of it too.

But for I give at sake, say, I decide, I actually just want to give that to my daughter.

I just want to give that to her.

Then I feel like that's a gift to her.

The tax man should just leave me the hell alone.

But he won't, she won't.

They won't.

You need to be really careful.

So and on the face of it, I think you nailed it.

So it's a really nice thing to do, and to be able to give a gift while you're here on the earth to see the benefits and the joy that gift gives.

I think is a wonderful thing.

And if you can, I guess philosophically, I think you should.

So you should be able to if you can financially and you are in a financial.

Position to do so.

So we see, as I said, every second person is saying I want to help my kids.

I want to help my kids into a house.

Do so, yes, but only if it doesn't put your own I guess financial future at risk.

So you need to be in a decent financial position yourself before you go down this path.

So we probably need to explore that and how you work that out.

But can we discuss why these rules are in place and what they might do.

So, for example, with the current situation, So if she decides she wants to gift this unit to her daughter while she's still living, what are the implications what happens from a tax?

Yeah, so from a tax?

So this in Karen's instance, it's not her house, is it?

So it's an investment property.

It's a property that she owns that she doesn't live in.

So on gifting of that house to her daughter, there will be some capital There will be capital gains implications, So what she paid for it and what the value is it the day she gifted it?

So this is important.

So even if you give it for no consideration, you don't receive her send I think that this was Karen's intent.

The taxman is still going to apply the I guess the value on the day it was.

Gifted, and who works?

Do they just get a market value?

They'll get a market value, right, yeah, they'll get a market value.

The account and will get a market value, and they'll say, right, you've sold.

You've gifted your house, which is effectively a sale for capital gains tax purposes.

They'll apply that against the cost base.

You'll get a very generous discount from our government because you've probably held it for twelve months.

But then there's capital gains tax to pay and that might be an unintended consequence of this gift.

So there's capital gains tax implications which need to be considered first of all.

And so just so, if Karen has held this property for a significant amount of time, and given what we know that has happened with property prices, she could be up for quite a significant tax bill.

Yes, yep, and she needs to at least address that or think about that before she just goes and gives it away.

What happens if the daughter inherits this property from the will, So and Karen, I'm sure you're fit and healthy, and I wish you a long and prosperous life.

Argument sake, yes, you know tomorrow something happens to Karen.

The daughter inherits the property.

Does the daughter then have to pay capital gains tax?

Not immediately, So the daughter inherits the cost base of Karen the mum.

So if Karen paid five hundred thousand dollars for it when she bought it, and say it was worth a million dollars on her passing, then her daughter would inherit a cost base of five hundred thousand, and she would be deemed if she lived in it to then have moved in at the price of a million dollars, and that becomes her residence, so she doesn't automatically pay tax, whereas on the gift the mum Karen does automatically paid capital gains tax.

The daughter only pays capital gains tax if she ultimately sells that property and if she lives in it for twenty or thirty years, it's probably not going to be too much of a problem.

But if the daughter moved into the property and then goes to sell it two years later, is the capital gains that she has to pay two or three whatever it might be based on the growth from the million dollar property that she moved into.

No, it's from the existing.

Yes, So between this price, yeah, it's the purchase price and the inheritance price.

That's her tax.

That's her tax if she lives in it for two or three years and it grows again, it's a principal residence, and so there's no tax on that portion of the game.

Okay, if she sold it straight up, is it better to sell property.

That you inherit straight away?

Yeah?

Depends on what you need.

So you're going to pay tax.

So if you want to live in it, it's probably better to defer the tax.

If you're going to live in it or use it as an investment yourself, then why pay the taxman when you don't have to.

So at least you've got the option as a gift.

There is no option that gift is a trigger for capital gains and you're paying that tax.

You mentioned.

It's becoming an increasing question to you.

There's becoming the number one question from clients of yours.

Now, how do I help my kids?

And so do we feel that the laws might not have kept pace here with this property price gross?

Because presumably I'm going to make assumptions here, but presumably the laws of the way they are to stop people shifting their assets around and avoiding paying tax.

Yeah, certainly the government doesn't want people to gift houses and not pay tax.

So the laws are there so to stop you from gifting and avoiding tax.

Now, if you gift your own house, it's a different story.

Karen's is an investment property, so she pays that capital gains tax.

If you were to gift your own principal residents whole other conversation, I suppose.

But there is no tax on your principal residence, so you can pass assets on into generationally if it's your private residence, because there's no tax on mine.

And if I give my house to my kids or one of my kids, or Karen does, and it was my residence and it's their residence, then there's no tax.

There's no capital gains tax.

So could Karen gift her daughter the home that she's currently living in.

It is I've got no idea where these properties are.

What's this?

But Karen gives the daughter her primary residence the house she's living in, yep, and then Karen moves into the unit.

Yes, no tax, no capital gains tax.

But no capital gains tax.

So that's how Karen's daughter can can own a property and avoid both of them avoid paying.

Capital going capital gains tax.

Yes, there's still some capital gains tax embedded in that investment property, but it's not dealt with until Karen passes away or not triggered or passes away and the property is sold.

You can defer it.

And I'm so sorry, I'm going down so many rabbit holes I'm trying.

You can see how I'm.

Trying to get out of paying time.

I am, I am.

I'm helping Karen here.

So if then could then Karen, who's moved into the unit and the unit is her primary residence, then at some point in the future gives that unit to her daughter and avoid capital gains tax.

Not avoid it because it's been an investment property for the period of time until she moves into it.

Okay, so she can minimize So she's owned it for three years, and you've got this gain.

If she then moves in and lives in it for twenty more years, then the game becomes reasonably marginal in terms of the overall gain.

So yeah, look, if I was Karen and I was hell bent on giving my daughter a property, that's what you've just come up with is a reasonably good solution strategy.

So what's your advice to your clients when they come and say, I want to be able to gift, whether it's property or money to my kids.

Maybe it's about there'll be people having conversations about it, wanting gift money, to provide a deposit or to at least help my kids on their way.

What's the what are the tax implications for that?

And what is your advice to Okay.

So we've touched on one.

So the property gifting is actually more a lot more rare than giving of cash, so and it has far more I guess complications attached to it.

So capital gains is one in Carriage's because it's a it's an investment property she's gifting, But there's also stamp duty payable by her daughter on the receipt of that property because she's even though she hasn't paid any money.

The tax office again applies the stamp duty on the market value at the time of the transfer.

So there's capital gains for Karen and there stamp duty for her daughter.

That seems so unfair though it's really the state government should be able to waigh that at least because you're there's no treasure that hasn't paid any money for it, and yet the government will treat it as a.

Change of ownership.

It's the same paperwork as far as the government are concerned, is if I was to sell a property to you.

But the stamp duty on these properties now is quite significant.

Yeah, the government must be making a fortune on stamp duty.

Yeah.

And the thing about stamp duty, it hasn't been changed or the rate of stamp duty hasn't been changed for so long, and yet the prices of property have gone through the roof.

So they're making a lot of money that the state government.

And yeah, that sugar hits.

It's hard to unwind, it's hard to give up.

They're not even likely to.

Do so, Okay, So it sounds to me that property is too difficult, and that's probably adding two inflated property prices because people.

Yeah, it wouldn't help, it wouldn't help.

And again there's the one less property going in the market, isn't there's sort of kept in house, so that doesn't help with the supply of property.

So property is problematic.

Cash is a lot simpler.

So if you were to gift cash, there is no tax ramifications on the gift.

Tour or the giftee, so no problem.

So no problems.

Okay, So my dad decides I'm going to give jewels fifty thousand dollars tomorrow.

You can just put fifty thousand dollars into my account.

No problems with me, I can so from a tax point of view, no tax on a gift yet in Australia, and no tax on obviously receiving a gift.

So the problems then with the money gift come from if it's money, that is your money, it's important to you, and it's in the family.

What if I was to gift, know, you two hundred thousand dollars and then you go and split up with your husband and your husband walks away with half of my two hundred thousand dollars, So that's something to consider.

So my view, I think if you're going to make large gifts, a be in a financial position to do so, and be consider making it a loan rather than a gift, so you've got some sort of clawback on that money if something were to happen to your loved one.

So let's say you've structured as a loan to me, so you get to loan me two hundred thousand dollars.

Then my husband and I bullit when it comes to the asset division.

That's treated as.

A oh if it's a loan, Yeah, it's a loan, So it's a liability that you have, and me, as the lender, can say, oh, hang on, jewels, you're getting you're getting divorced, or you've split up with your husband.

I want my money back.

I see.

So while when you're splitting everything up, pay me first, then you can split the rest up.

Does that then mean that my husband could get less from the asset pool because there's a two hundred thousand dollars loan and instead of that being one hundred thousand dollars each, I actually get two hundred thousand dollars outcause of a liability.

But that will then reduce the.

Yes, you pay me back as the lender when your divorce or financial settlement is settled, legally, I can relend you that I can't I and do it again.

So it is a good way to protect family money.

So it is one thing to consider when making a gift.

Sure, I'm looking forward to you having those discussions with your daughters.

They're only getting loans, there's no gifts.

Okay, so we probably need to explore We need to explore that a little bit further.

I think in terms about how to protect the transfer of wealth through the generations, But just on gifting itself.

Is there are some sort of caps so.

They're not too there are yet that then can.

Affect your eligibility for the age pension.

Yes, yep, so there are.

And in your example where you your dad has lent you no gifts you fifty thousand dollars if he is on an age pension.

Weirdly, part of that gift, forty thousand dollars of that gift is treated as an asset for five years.

So you need to be careful if you're on an age pension and giving money away, because even though you give it away, essentielic is still going to assess you was owning most of that for five years.

Again, this is to try and stop people throwing their money left front and center and get under.

Yeah, under the asset lest asset test limit.

So you're allowed to give ten thousand dollars a year, which doesn't sound a lot.

It doesn't really sound like much.

Has that been changed over the years?

Has that really kept up with twenty You should ask, because it hasn't.

Two thousand and two was the last time the gifting limits were meddled with, So ten thousand dollars you're only allowed to give a year or thirty thousand dollars over five years for the last twenty three years.

Do they need to change that?

They probably should, at least inflate it.

So I did some numbers on it.

So in twenty twenty five that ten thousand dollars should have roughly doubled, So you should be allowed to give now twenty thousand dollars or sixty thousand over three years.

But it hasn't changed.

So it means that you can't give much away and or you.

Have to do it five yes.

Or give yourself a run up.

Before sixty seven.

So you have to do it before you turn sixty two.

Yes, So if you've plan it out and if you and we see this lot, I've paid tax all my life, you know I'm entitled to my age pension.

If that's where you want to head.

And you say you've got a million dollars in super and at sixty two you're retired, you can give five hundred thousand dollars of that away.

By the time you hit sixty seven, that five hundred thousand dollars gift or alone, if you get advice, is no longer an asset as far as centling a concerner.

You do that before you're sixty two.

Yep, because they only assess it for five years.

Do you think they're likely to change that as this intergenerational wealth transfers.

Moment, maybe like if enough people did it.

And I've done this for a long time, but I haven't seen extreme examples of that.

My view of that is, if you never if you're fortunate enough to never have to walk into a sentilink offers, you should accept that as being a pretty good thing, and don't force your way into an age pension just because you feel you're entitled.

I get it.

We pay tax all our lives and all that.

Yeah, sure, well I agree with you.

I feel like that there's if you can.

If you can have financial indep and you've worked very hard for it, and you do not need to rely on the government.

We all life.

That's a great thing, which is why I understand why people get so worked up when the government goes to change rules, particularly on that superannuation change.

Talking about when we come back from the break, we might talk a little bit more about that.

So there are some tricks that people are making with sentling to try and that we've highlighted at The Australian this week and it's really interesting.

It's a way around those asset tests and I want to get your thoughts on that and whether it might be a clever strategy to do it.

Basically involves getting a better property and getting the age pension at the same time.

But I also want to get your thoughts on whether you should ever really pay off your mortgage.

There's this growing trend that you should never pay off your mortgage.

It sounds crazy, but we'll find out why when we come back.

Welcome back to the Money Puzzle.

I'm your host, Julianne Sprague, Wealth editor at the Australian filling in for James Kirby.

He is on a well deserved break.

He will be back with you shortly And I'm chatting to Jason Featherby, head of financial advice and a co founder of Lewin Wealth.

He's been in the game a long time.

He's advised people on all sorts of strategies and Jason, before we went to the break, I mentioned to you about some of the strategies people are using to make sure that they can get their aged pension and it has raised my eyebrows.

James Gerard, well known financial planner.

He has written about this for The Australian about it sounds it sounds nuts to me, but I can can't understand how this can work.

So it is all about getting access to the age pension and there is an asset test in place and if you don't meet the requirements, no age pension for you.

But there is some people have found a way around and it involves, for Kim sake, taking four hundred or five hundred thousand dollars out of your Super three hundred thousand whatever it might be, taking a big chunk out of Super and upgrading their property so they use a huge chunk of money, get a better home, and reduce their assets qualify for the age pension.

Yeah, I like it.

I mean to put it simply, if you're over the asset test limit for an age pension as a couple, every ten thousand dollars you can get rid of.

That means gifting, which we've spoken about.

Upgrading the house now that could mean literally just renovating it, putting a new kitchen in, putting solar panels on, or going to the extreme of actually moving house.

You get seven percent return on that money.

So ten thousand dollars gives you a seven percent return in extra age pension.

So in some instances it's actually a pretty good strategy.

That's not terrible, is it.

No, Because it's hard to get a seven percent return guaranteed for anywhere else.

The system wasn't designed to do that though, right, like the age pension is meant to.

Be this.

All people will argue with me.

I've got to stay safe to that.

But I know there'll be lots of people arguing that.

You said, like people have paid taxes, it's my right to it.

I'm not sure it was designed for this.

It wasn't designed to go and get marble bench tops that have.

The state of the art solar panel.

I'll get a twenty thousand dollars fridge.

Big holidays, you can go spend some money on holidays.

In our defense of those that provide these strategies.

When the age pension was introduced, people didn't live to get the age pension, so they thought, we'll offer everyone an age pension at sixty two wherever the original age was.

But I think the average life experience was probably fifty eight or something, so it was never going to be a big cost.

Now it's sort of crept up on the government and it's now a huge cost, and they don't want us doing these things.

But the rules are in there to legitimately have a better house, get an age pension, and for some people, and I think if your marginal, so if you've got I don't know, eight hundred thousand dollars, say, and you can get rid of two or three hundred thousand and get a better house, maybe make a gift to the kids, prepay a funeral, other things that are not asset tested, and get paid well to do it.

Then why not if you have three million dollars in super and you take two and a half million dollars and buy a mansion in del Keith to get a full age pension, I'd be saying, what are you doing?

So everyone should get their own advice on this, But for some it's a really good strategy and for some you just why is the risk?

Then if you pour all of that asset then into climb a home or ice.

Property, you've got less money.

So you've got less money and you don't know exactly depending on your living costs.

The age pension sounds wonderful, but what is It's forty odd forty five thousand dollars a year for a couple.

It doesn't meet on its own even enough to meet and make a modest retirement living.

So you don't want to give all your money away just to get forty five thousand dollars and have no money because you'll need new cars, you'll have poor health, sadly to a lot of people, you might want to go on holiday.

Heaven forbid, you might end up in age care and you might end up in age care at the same time, So where do you get the money to pay for that?

And so that's why I think again, if you can avoid centre link because you have enough money.

You're in a really good position, and I certainly wouldn't go forcing the issue just to get a bit more help from the government if you are wealthy.

But when you're saying borderlines, So what's your view of, I.

Reckon scept Yeah, six to eight hundred thousand dollars of accessible assets.

That extra two or three hundred thousand dollars can do a lot in terms of housing, solar panels, gift for kids and things like that.

And you are by getting your assets down two or three hundred thousand dollars and leaving yourself with five hundred thousand, for example, it's still enough money to have access to and you're going to get a much higher pension or bigger bang for your buck in terms of the money that you legally get rid of.

If you've got three hundred thousand dollars in super few other things and you're already getting most of a pension and you go buy a new house and you get a tiny bit more pension, you know, I'd question why it makes sense.

So it's when you're in that sort of it's almost middle income, middle age or middle wealth zone where you can do a bit of clever stuff with assets and the age pension.

Right for the picking.

Great place to give advice, but don't go forced this uear by spending a million dollars on an extra house, or you know, giving a million dollars away to kids, leaving yourself with four hundred and fifty thousand, because you just don't know what's around the corner with your health or with what you might need.

So before we get to why you might never want to pay off your mortgage, can you articulate how you can determine your financial position You mentioned earlier when you're trying to work out gifting, So whether that's gifting a property, gifting money to the kids, how do you determine that you're in the financial actual shape to do it.

Because it's a very emotional, particularly when it comes to family and kids, that there is this drive and this desire to really help.

Them, to really help because they're our kids, so we understand that, but look to put it really simply, you should be in a financial position where you have no debt or it's pretty much gone.

And if.

You didn't have this money because you've gifted it away or lent it, it's not going to impact your ability to generate an income in retirement.

So you should have enough other assets to generate a passive income for you to live comfortably in the retirement that you want.

So they're the two basic ones.

No debt and enough assets to produce the income that you need.

If you're not there, then I'd think very carefully about giving money away to kids that still have time to get there.

You're there, you know.

If you're not there, and if you've got debt or if you haven't got enough insupor to live off, and you're giving away or proposing to give away hundreds of thousands of dollars, probably don't you.

We have to counsel clients then away from this.

All the time they've come to you, they are dead set going to gift money or do whatever it was to help their kids, and you've actually had to point out you actually really aren't in.

Yeah, the financial and you do it from you're my clients, and I'm here to help you and allowing this or I guess indulging this or accepting this gift or loan or whatever we want to do is going to leave you short or it's going to put your own retirement at risk, and you're mad.

And do they get concerned about what their kids will say?

I do.

I am worried about this sense of entitlement that's brewing in a generation.

There is and they do, Yeah, they do.

And so some people don't want to draw down on this super because they want to leave it all to their kids and want to make sure they have every cent left for their kids.

And my view of that is, like you were kids, we were kids, will be okay.

Generations of kids have been okay.

Why do we suddenly need to give everything up for our kids?

Like, yes, help them, love them, but don't do it to your own detriment.

It's their time to make their way in the world, their adults.

Now, that's what I think.

Yeah, So unless you are very comfortable, then I'm all for it.

If you're not comfortable yourself, then I'm dead against it.

Don't do it unless you are in a position to do so.

All right, let's move to this topic about paying your mortgage off.

I was always told it was the one thing you should focus on.

Pay off your mortgage.

Don't do anything else, pay it all off.

I still still think that's the thing to do well to pay them off in the main.

Yes, but there is this theory that you should pay it well off except never close it out.

So just have a little bit sitting in there, or maybe it's technically paid off, you've just you have sitting in there or something.

Why would you not just close out your mortgage?

I picture a day, Jase, I picture a day.

I just I feel like there will be a ticket take parade.

I feel like there will be fireworks.

Yes, it will be a spectacular event.

Paid off the mortgage, it is a zero dollar balance.

Close it out, Thank you very much, see you later.

I don't even think you get your certificate of title anymore.

I think they're all digital, aren't they.

So you know you used to go to the bank and collect your title when you're paid off your debt.

That's a symbolic event, but that digital.

I don't like it, sadly that touch and fairly aspect that it's gone.

Even with your certificate of title, you'll never see it unless you sort of you've already got it and long held it.

Why should I not ever close out the mortgage?

There is a school of thoughts.

So again my view is, if you've got enough in super and you're comfortable.

I can't see the harm in closing off your mortgage, and I know we'll touch on it, but I've got a different view on credit cards.

But so the mortgage is, if you leave it open, it's accessible, and people think, oh, I just in case I need it, just in case I need it.

But what if you're not.

Very good with money and you just need it way too often?

Then you can go from a period of having paid off your mortgage left it open, then because you're not very good with money, you've gone on three overseas trips, bought the kids a car, and suddenly you've got two hundred thousand dollars a debt that you didn't know where it came from.

So if you're not very good with money, or you don't think you're going to be very good with money, then keeping access to a heap of debt is not the best thing.

Okay, So definitely close it out.

Oh if you can, Yes, I would.

But what happened.

So as much as I would love to tell you I'm so far ahead of my mortgage and it will be sometime in the next year I've paid it off, I have Buckley's chance of that it will be as I'm older, and then I get concerned about access to a line of credit.

So if I close out the.

Mortgage, where do I get emergency or rainy day money from?

Yes, something comes out of left field, and all of a sudden, I go to the bank and say, hey, you know need alone.

And where they're a bit agist.

Banks, they're very agist, and they're very incomist, which they yeah.

That's probably what they are.

They're incomist from which.

I don' have no issue with being incommistries.

Inventor worked he did incomist Okay, I don't mind it either.

They care about your income.

They care about your income and your ability to repay.

So even if you've got access to a million dollars a super and you're retired because you've got no wage, the bank, a bank will be very reluctant to give you debt, which is to your point, not keep that mortgage open.

I prefer to keep a credit card available, a low cost, not one of these fancy credit cards, low interest rate credit card.

It is easy to it's easy to rack up a bit of down on that it is.

But it might be five or ten thousand rather than two unpaid mortgage just.

On credit cards.

I had not thought about this, this idea that you should have a credit card in your own name rather be the secondary holder.

Now, in my household, we always have a secondary holder because you've bother with all the paper work and mine.

Yeah, but if you and again, if you're both working, not a problem of generally not a problem if you're retired and you've got no income wage income, and you have a credit card with a secondary card and the primary card holder dies.

Yes, So, for argument's sake, my husband and I have a credit card.

He's a primary holder.

I'm a secondary holder.

Love your honey.

Something happens and then I think I can continue to use this.

I've used his cards for however many years, but because he is the primary holder, it is in his name, and so it gets extinguished, and then it might be difficult for me to get my own card.

It might be difficult for you, but you have a job and your work.

If you're seventy years old and that happens, it's impossible.

So it's I think it's important to have just a low cost.

So low fee, low cost.

It's a burnerchard it's pretty much it's literally an emergency card.

An emergency card, put it in the bottom drawer, but make sure you've got access to it.

At what age do people be thinking that they should do that?

Every couple should have a card.

In therea while you're working, and you can so because when you're not working, it becomes very difficult to get a credit card, no.

Matter how old you are.

So while you're working, you can still have the main credit card with a secondary card attached.

But just for that for your spouse, have another credit card that you just never use, and just make sure it's low cost or no cost.

Don't need the frequent flowers and all that stuff.

No fees, no fees, so and you can get them.

Jason, we need to get to a break and when we come back, we have some listeners with some pretty good questions.

I reckon Andrew's written in about gifting rules, and Brian wants to know if super automatically passes to a spouse upon death, and so we will get to that, all right, We'll have that discussion when we come back.

Welcome back to the Money Puzzle.

I'm joined with Jason Featherby from Lewin Wealth.

I'm your host, Julianne Sprague, Jason.

We've had some listeners email the Money Puzzle.

The Money Puzzle at the Australian dot Com dot au is where you can send your questions to.

But Andrew has emailed, and he has mentioned about this ten ten, one thousand dollars gifting cap.

He did want to know if they had any if there had been any discussions about ever increasing.

I don't think so.

It is weird because we talk about deeming, we talk about indexing the age pension rates, and we talk about indexing the asset test limits.

I don't know it would have been discussed, but I've never heard anyone suggest that it should be higher.

But clearly, what did I say twenty years.

We've put it on the agenda right here at the Money Puzzle.

We'll put it, Sir Jim Chalmers.

Shall we Andrew and we'll see what he's got to say about that?

Okay, Andrew, His question is around this gifting rule, and so, for argument's sake, so he understands that the ten if you gift ten thousand.

Dollars cash to someone, it's a gift.

That's a gift, and that's it and qualifies as a gift.

But Andrew says, what if this particular Soviet the pensioner or parent was to pay for a child or a grandchild's bill.

So there's a bill to pay.

Is that a gift or is that simply kindness and helping a family member out?

I mean, surely if you're paying for a family meal, that's not considered.

I think there's probably a materiality thing here.

A meal you'd get away with ord imagine.

So what if I I mean ten thousand dollars is not is school fees?

Potentially that'd be a gift.

What do you mean it's a gift?

They're paying a bill.

Yeah, well, you're gifting the money to pay the bill.

I think.

I think the rules are you're not receiving anything in return, so therefore it's a gift.

So buying a car, paying school fees, things.

Like that gifts.

What if they were micro So what if they were ten one thousand dollar lots?

So what if the someone said i'll pay your power bills for the year.

Government's been gifting that left right and center?

True, just call it a rebate or a supplement and you might get away with it.

Does the taxman or centily how do they keep tabs on this.

It's very much an honor system in terms of the gifts.

But they also do have access to your bank account.

So if you were giving someone a thousand dollars a month and it was every month.

You'd get caught.

Okay, if it was a thousand here and a thousand there, and it's a bit random and you paid for you odd meal or even you did their shopping, you could wouldn't even know that someone else's shopping.

But when you're buying school fees, cars, regular amounts their gifts and be really careful.

Okay, Andrew, thank you very much for the question Brian wants to know.

Is super automatically passed to a spouse upon death.

Not automatically, probably, is the answer, but not automatically.

So if you have a very clean life and you've only had one spouse and there's not much room for error, then it's likely that your super would go there.

But your super is where it goes is dictated by the super fund trustee, So whoever's the boss of that fund will decide where your money goes.

So if you want to be absolutely certain, spouse or otherwise, you make a binding nomination in favor of your spouse, and then it leaves no room for error, no room for judgment, and no chance that an ex spouse or a challenge to that.

I guess that passing of that money will come about.

Okay, So it's not automatic.

You have to do something about it.

You don't have to, but you should, you really should so, and it's not hard.

So it's part of your super fun setup.

Or you just do a binding nomination in favor of your spouse.

It means that when that if you pass away, the trustee will automatically pay that money to the spouse rather than go and look for other people to give it to first, which is what they would do with no nomination.

Okay, notice binding nomination, easy enough to do.

One page, one tick wow spouse.

Jason, thank you very much for joining us on the money Puzzle.

It's been a pleasure, it's been fun.

Thank you.

Jason Featherby from lun Wealth and will be back with the money Puzzle next week.

I am Julie and Sprague, wealth editor at the Australian.

For more insights on what the smart money is doing, you can go to the Australian dot com dot au slash wealth