My children are 16 and 13, and I set up in-trust share accounts for them both through Bell Direct. However, I’ve just learnt that 50 per cent of their returns have been withheld as tax. Each child has less than $5000 invested. Neither of my children has a tax file number, and I didn’t provide my own. I suspect this might be the cause of the issue. Have I made a serious mistake, or is it something that can be easily fixed by supplying my tax file number to Computershare?

The 47 per cent withholding happens automatically to certain investment income when no tax file number (TFN) is recorded – the bank, share registry or investment fund must deduct the top marginal tax rate until a valid TFN is provided. Small amounts of investment income may be exempt from the withholding provisions.

For anyone aged under 16, there is no requirement for “no TFN withholding”. If the investment accounts are “in trust for” your children, you can supply your TFN as you are the legal owner of the investments. That will stop the withholding tax immediately. However, your children can also apply for their own TFNs, which is straightforward.

Children under 15 are unable to apply for a tax file number online – you can complete the online form, then take your child’s identity documents to an Australia Post or Services Australia outlet for verification (you can also post the documents with a paper form). If they’re over 15, they can apply themselves online, using their myID account linked to the ATO.

I’m 80 and have been a widow for three months. We had a self-managed super fund (SMSF) and we were both trustees. What are my legal obligations now that he is no longer alive?

I’m very sorry to hear of your loss. There will be a number of matters that you will need to attend to in relation to the fund on your husband’s passing, with one of the initial pressing matters being the trustee of the fund.

If you are planning to rely on making carry-forward concessional contributions, it is essential to get professional advice.

When an SMSF has individual trustees rather than a corporate trustee, the law requires that there are at least two trustees – every member must also be a trustee, with single member funds appointing a second trustee. In this instance, when one member of a two-person fund dies, the fund has six months to restructure to ensure that it continues to comply with the legislation.

At this point, you have three main choices. You can appoint a new individual trustee – someone who meets the legal requirements, such as an adult relative, trusted friend or professional adviser. The appointment should be made as soon as possible (within six months), and the fund’s trust deed, ATO records, bank accounts and all individual investments will all need to be updated for this change.

Alternatively, you can convert the fund to a corporate trustee, which is often the better long-term solution for many individual trustees. You would set up a company, possibly with yourself as the sole director, ensuring that this complies with the trust deed of the fund.

You may choose to appoint another qualifying person as a second director, so that if something happens to you the fund assets can be dealt with simply. All directors will need to have a director ID before they can be appointed. The fund’s assets will then need to be recorded in the company’s name as trustee, and you continue running the SMSF as a single-member fund.

The third option is to wind up the fund and either withdraw the benefits (as you have met a condition of release) or rollover the benefits into an industry or retail fund. If nothing is done, the fund will eventually become non-compliant, which can have serious tax and regulatory consequences.

My partner and I are both 69. I can meet the work test next year if needed. She still works part-time, earning about $15,000 a year, so she’d pass the work test. We plan to sell our mortgage-free investment property, which only returns about 3.5 per cent after expenses, and we’re tired of the hassle. The sale would trigger a total capital gain of around $82,500 each after the 50 per cent discount.

We’ve had conflicting advice about whether we can use concessional or non-concessional contributions – using the bring-forward rule – to reduce the capital gains tax. My partner’s super balance should be under $500,000 by June 30, as we’ll withdraw some funds for renovations. Can she use the bring-forward rule to contribute more than $30,000 to her accumulation account (since her balance is below $500,000) and make that contribution deductible or otherwise reduce our tax liability on the sale?

There’s no tax deduction for non-concessional contributions, but it may be possible to use carry-forward concessional contributions to reduce or even eliminate your capital gains tax liability. To qualify, the contribution must be made in the same financial year in which the contract of sale is signed.

Your total super balance on June 30 of the previous financial year must be under $500,000, and you must have unused concessional contributions available from the previous five years. Based on the information you’ve provided, this looks like a possible strategy.

Before planning to make any additional super contributions, you should check your ATO eligibility to make carry-forward concessional contributions, either via your myID or asking your accountant to check via their ATO access.

Regardless of her eligibility for these additional contributions, on the basis that your partner’s employer superannuation contributions are 12 per cent of her $15,000 earnings ($1800), she will be able to contribute up to $28,200 to help mitigate the tax on the capital gain.

If you are planning to rely on making carry-forward concessional contributions, it is essential to get professional advice before you sign the contract for sale. Timing and eligibility are critical and getting it wrong can be very costly.

What happens to the taxable and tax-free components of a superannuation accumulation fund when the balance is transferred to an account-based pension?

When you move money from a super accumulation account to an account-based pension the taxable and tax-free components transfer in the same proportions at the date of transfer. For instance, if your accumulation account is 70 per cent taxable and 30 per cent tax-free, your pension starts with the same ratio.

Noel Whittaker is author of Retirement Made Simple and other books on personal finance. Questions to: noel@noelwhittaker.com.au

• 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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