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Meet John (55) and his wife Susan (52) who are both still working.  John’s an optometrist in the practice he started 15 years ago, and Susan works as an administrator 4 days a week in a veterinary clinic.

They have earned good incomes for many years now and have recently paid off their mortgage.  They have 3 children: Josh (26) has lived independently for 3 years, Matt (23) who just started his first full time job since leaving uni and has moved in with 2 friends, and Jade (19) is a second year accounting student and still lives at home.

John and Susan met with one of our Planners as they have significant surplus income now and are planning to retire in the next 5-10 years.  The following points became apparent during our discussion:

  • They would like to help their sons buy their own homes
  • They want to help their daughter as she finishes uni and begins her career in accounting
  • They want to know if their investment property, which they do not yet own outright, is worth keeping in retirement.
  • Their property is positively geared and they want to know if they should start paying off the loan or sell it.  They can’t agree what to do with it
  • They are thinking seriously about retirement now and want to know if they can afford the lifestyle they want
  • They are planning a trip to Europe in a few years and want to make sure they can afford to do it ‘properly’
  • Susan wants to buy a new car as the ‘people mover’ is too big for her
  • John plans to sell his business when he retires and wants to know how best to invest these funds without paying too much tax

If you can identify with John and Susan please read on.

As John and Susan are used to actively managing their money, they were glad their Planner took the time to explain the complex strategies available to them in detail. We explained to John and Susan the advantages of keeping money in superannuation. By implementing a transition to retirement strategy for John, we were able to save him $10,000 each year in income tax.

We considered the tax consequences of keeping the investment property in retirement. We ran a number of calculations based on different scenarios and agreed to keep the investment property until John and Susan retire. By waiting until just before they retire and contributing the sale proceeds to superannuation, we are confident we will be able to eliminate any additional tax liability. Also, we agreed not to start paying off the loan as this would increase their annual expenses, and we believe the funds will be better off invested.

We explained to John and his accountant the various and complex tax concessions that he may be able to access when he sells his business at retirement. By taking advantage of the various small business concessions, we are confident we can avoid paying tax on the business sale proceeds and contribute it directly to John’s super fund.

We also established plans to help them help their children out and to make sure their European holiday does happen.

John and Susan took their time to carefully read our advice, and asked us several questions they had, to make sure they understood everything properly. Our Planner was more than happy to take the time to thoughtfully answer each question they had. As a result, John and Susan happily agreed to our advice.

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