Our nephew turns 21 early next year, and we will be gifting him $21,000 to mark the occasion. Can you recommend somewhere we can park/invest this money on his behalf until he is ready to use it? I anticipate he will put this money towards a deposit on a property in the next 5-10 years.
What a great idea, and a lucky nephew! If you are confident he will use it to eventually buy a home, the best bet would be to deposit it into his super fund, and he can then use the First Home Super Saver scheme to get the money back out when he is ready to purchase. This strategy has several advantages.
Locking your gift away inside the First Home Super Savers scheme would be a smart move for your nephew.Credit: Simon Letch
Firstly, it means he won’t need to include the investment earnings in his personal tax return. The earnings will be taxed at 15 per cent within his super fund, which is likely to be attractive compared to his personal marginal tax rate, particularly as he progresses in his career.
Having these savings in super also mean they aren’t easily accessed and diverted to other purposes. His super is likely to be in a fund option with a leaning towards growth assets, and so earnings will on average be better than cash in the bank, albeit with a little volatility year to year. Given a 5-10-year time frame that volatility is fine.
And lastly, he might even get a bonus $500 from the government under the co-contribution rules. Note there is a limit of $15,000 per year that can be recognised under this scheme, so you may need to spread your gift across two financial years.
If he might want to use the money for some other purpose, then super is out. In that case, the investment would very much depend on his time frame. For example, if he was planning to use the money to travel overseas, and expected to head off in the next year or two, then it would be best for him to keep your gift as cash in the bank.
Alternatively, if his plans meant the funds would be left undisturbed for many years, then he could invest in a fund, either directly with a fund manager, or on the stock market via an Exchange-Traded Fund (ETF).
Hi Paul, I am soon to reach pension age. Can you tell me how much super I can have before it affects my pension?
Centrelink will run an asset test and an income test, and whichever produces the lower entitlement, that is what you will receive. This being the case, there is no specific amount of superannuation that you can have. Your super savings are just one part of your total assets.
