Selling land before retirement
Today’s topic has been triggered by my personal and professional events, which led me to start thinking about opening our next office in a country town in Victoria, and it just happened that it will be in Gippsland on beautiful Gippsland Lakes in the town of Bairnsdale.
Now every Thursday night I am driving from Melbourne to Bairnsdale to spend the weekend there, organise the new office, get to know the locals, talk to as many people as possible.
Which is not that difficult, as my car now is a great conversation starter.
Many people are quite intrigued by the information written on my car, but I do want as many as possible to be watching this channel.
Considering that 1/3 of Australians are either retired or preparing for retirement, that is a lot of people that can learn a great deal about financial preparation for retirement from this channel.
And then a detailed discussion and a plan with a financial planner how to put it all together, how to deal with taxes, possibly Age Pension, creating income streams, building investment portfolios will set you up for a good and secure retirement.
So feel free to call our office and book a meeting.
During a number of those discussions, I have noticed a reoccurring situation or a problem. Many people in the country are asset rich and income poor, and when preparing for retirement, somehow you have to turn this around.
When you were young, you had the time, strength and energy to be working on your land, but now at the time of thinking of retiring, things are different.
Many are selling the land and the farm. Either because you are unable to work on the land, or you need to downsize due to health, or you just had enough. But your kids are not interested in taking over, as live in the city has more appeal that the hard work on the land.
So I had lots of conversations already with people/ farmers selling the land and asking me the same question over and over: “what do I do then? What do I do with the money?” How do I support myself and my partner? How do we derive an income to live on?” and this is how the conversation starts.
So I am here today to discuss this very issue: you sold your land, you have a great deal of money in your bank account and what should be your next step? How should you set yourself up for the remainder of your life?
Getting the best price for the sale of the land is the biggest focus for anyone, but you really should discuss the sale not just with a real estate agent, who most certainly wants to assist you, but is only looking from the perspective of getting the job done and hopefully getting the best sale price.
However, by speaking with another professional, such as financial planner, you can discover other important issues:
- Timing of the sale matters, and this is due to the issue of Capital Gains Tax if the sale of your land is subject to it. If you sell the property too late in the financial year and you do not settle in the same financial year, you may not have other funds to deal with strategies to reduce your CGT. If your settlement is to happen in the new financial year, it is too late to deal with CGT that was triggered in the previous financial year. For some reason people believe that the date of settlement is the date for CGT calculations, when in natural fact, it is the sale date that counts. So you have to make sure that your sale and settlement are all happening before 30th June the same financial year and you have to give yourself enough time to perform financial transactions that could minimise your tax.
- Advice on how to deal with CGT should be received once the sale price is known but long before the settlement date – this is essential, otherwise you will pay the full CGT even without knowing that there was a way to minimise those costs legally.
- What to do with funds received from settlement – now for a big question: what should you do with all this money. Unfortunately, there is not one straight answer. It all depends on your requirements:
– Do you need an income from your funds?
– Do you want to invest just so your money will grow, but you have other means to support yourself?
– Did you sell the land and the farm because you need to downsize, so you will be buying a new home, with the remainder being invested to provide for your retirement?
– Do you wish to leave any funds for your children or other beneficiaries?
– Do you wish to be eligible for government benefits such as Age Pension?
– How is your health? Is Aged Care important to be included in your plan - Choose your investments wisely – it is only now, after you have found the answers to the above questions, that you can start planning as to how invest your savings and what investments are appropriate for your needs.
– Should you invest into super?
– Are you even eligible for super contributions and if yes, what type of contributions are the best for you? How much can be contributed and how often. - If there are funds left over that cannot be contributed, what should you do with those savings?
– What about the tax? How can the tax be minimised?
– Should you invest into shares? Managed funds? ETFs?
– How should you look after your investment portfolio?
As you can see, selling your land or your farm is not as easy as choosing your real estate guy, advertising the sale on Real Estate or Domain websites and getting the money.
This is just half of the work, the hard part is after the sale, so you better prepare yourself right and deal with all the issues before they arrive.
So if this sounds like you and your problem that you are or will be dealing with soon, book a meeting, with a financial planner from About Retirement via our website or just call our office on 1300 274 731. We are looking forward to speaking with you and resolving your financial and retirement problems.
By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement
