If we use super to help our kids buy a house, can we top it up later?

We want to give $250,000 to our son to help him buy a home. We are 66 years old and plan to retire next year. We do not have any spare money but do have around $300,000 in superannuation each. We have a $500,000 line of credit with the bank; however, if we drew this down, we couldn’t afford to pay the interest.

If we take this money out of super, will we be able to top up our superannuation when we sell an investment property in a few years’ time? Would this help with the capital gains tax?

Early inheritance is always a good idea, but make sure you can afford to give away the money first.Credit: Simon Letch

Thank you for your question. The first thing that jumps out to me here is to ensure you are aware that if you will be eligible for the age pension, the gift to your son will count as your asset for 5 years.

You may intend that this amount is a loan, in which case it would also need to be included for Centrelink purposes as an asset. It’s not a dealbreaker, but certainly something to be aware of.

It is possible to contribute into super up to age 75. Depending on the value of the investment property to be sold, the prospective capital gain, and your taxable income in the financial year of sale, there are several strategy opportunities here.

Tax-deductible concessional contributions may be a good place to start if the capital gain and/or your taxable income in the relevant year is high enough, bearing in mind that 15 per cent tax will be levied on the contribution when it arrives in your super fund.

Are you sure you can afford to give away that much money?

There may also be scope for catch-up contributions to get a larger tax-deductible contribution in, but again, careful calculations will be required to ensure the contribution tax applied does not exceed any benefit you gain from making the contribution.

After-tax contributions would also be possible. These are known as non-concessional contributions. The current annual limit here is $120,000 per person, and it is likely to be possible in your case to use the bring-forward rules to make three years’ worth of contributions in a single year.

All this is to say: yes, it would be possible to replenish your super in the future, so long as you get it done by the time you turn 75, but there is complexity here, so you should definitely obtain advice that considers the specifics of your circumstances.

A secondary issue is the impact this gift will have on your retirement. The gift you are proposing will consume over 40 per cent of your retirement savings. Are you sure you can afford to give away that much money?

I have no idea what the value of the investment property that you plan to sell is, so perhaps there is nothing to worry about here. But I certainly encourage you to reflect on what you would like to do with your retirement.

I’m sure you’ve worked very hard for many years and may have another 30 years ahead of you. Early inheritances can be an excellent idea where it is clear that parents have savings exceeding their needs. But they should never occur when there is the potential to put you in a position of financial hardship later in life. I’m sure your son would not want this either.

Paul Benson is a Certified Financial Planner at Guidance Financial Services. He hosts the What’s Possible? and Financial Autonomy podcasts. Questions to: [e-mail]

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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