Ask Paul: We’re pensioners and just inherited $440k

Dear Paul,

We are 68-year-old pensioners receiving about $1200 a fortnight following an inheritance. We have no other income.

We have $220,000 in super. We own our own home and have no other debt.

The inheritance was $440,000. Currently, it's invested at 4.50% at-call. If we combine our pension and income from the invested money, would we need to lodge a tax return in the future?  

Our other option is to put $360,000 into super. - Phil

Let's start with the easy bit, Phil: whether you need to lodge a tax return.

What I would suggest is you pop onto the Australian Taxation Office's website and use its online tool, 'Do I need to lodge a tax return?'

The next bit is not as simple. In general terms, I am a big fan of super. So, on the face of it, putting extra money into super sounds like a good idea.

Super, though, is simply a tax vehicle. Money that goes in can be invested as you choose, but as your presumably large super fund will tell you, earnings on your investments are generally taxed at 15%.

Here you need to consider whether earnings in both your names, if you split the inheritance equally, would be taxed at a lower rate if invested in your own names than if paid by your super fund.

Here we are moving into the complex field of financial planning for retirees and I am concerned that my general thoughts could lead you down the wrong path.

You would benefit greatly from some professional advice.

Without a good understanding of your entire situation, your spending requirements, your future plans and your attitude to risk, a good decision can't be made. If you don't have or know a good adviser, I'd suggest you start with your super fund.

It is likely to offer member advice or be able to refer you to an adviser.

This inheritance will make a huge difference to your future, and to benefit fully you need to get advice from an expert.

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