It’s never too early – or late – to take control of your finances

There are plenty of tools to help get your finances sorted at any age.

There are plenty of tools to help get your finances sorted at any age. Photo: Getty

Question 1. I am 28 and really just starting to focus on money. I have about $46K in HECS debt but nothing else. I earn about $57K a year and have been trying to save for a house and pay down this HECS.

However, with everything going in as it is – is it better to put into super when I can? I’m confused on the rules but know it’s also a lot less than what it should be due to not working until a few years ago (study and health reasons).

That’s a great question, and like many others you have competing financial priorities and it’s not always clear cut what you should be doing first.

Regular readers would know I’m a great advocate for putting additional money into super, however, given your age and other objectives I would not recommend you make any voluntary contributions to super just yet.

For now, ensure you are in a well-performing fund, in an appropriate investment option and review your insurance. The ATO’s YourSuper comparison tool and Super Guru can assist with this.

With HECS, given your level of stated income ($57K) you will be required to pay back a minimum of 2 per cent this year ($1160).

As you earn more, the minimum repayment rate increases. You can find the rates here.

Your HECS debt only increases in line with CPI each year.

Over the past few years this has been very low but jumped up to 3.9 per cent in 2021-22 (see table below) and will probably be higher next year due to the current inflation surge.

Generally, your HECS debt will have a lower interest rate than all other loans, including home loans, so if you do intend to purchase a home soon, I would concentrate on saving for a deposit and paying down a home loan first.

However, bear in mind that having a HECS debt may mean you can borrow slightly less.

Hopefully over time your income will increase, which means a larger percentage of your income will automatically go towards your HECS debt and it will therefore take care of itself.

As you get your loans under control and move closer to age 60 (the earliest you can access super) that is when you switch to prioritising voluntary super contributions.

It’s also good you are now taking an interest in your finances –Moneysmart has lots of resources to help you on your journey.

Question 2. In a previous article, it was stated that as from July 1, 2022, a non-concessional contribution of $330,000 is allowed so long as you are under age 75. No work test will need to be met.

Does this new rule apply to everyone or only to those whose superannuation/account-based pensions are below the Transfer Balance Cap? What other criteria have to be satisfied before contributions can be made? Thanks.

Correct that you can make after tax (non-concessional) contributions if you are under the age of 75.

But your transfer balance cap does not impact how much you can contribute to super, this only impacts how much you can start an account-based pension with.

However, your total super balance is relevant when working out how much you can contribute to super as a non-concessional (after tax) contribution.

For 2022-23 the annual non-concessional cap is $110,000.

However, depending on your total super balance as at the previous June 30, you can ‘bring forward’ future contributions and still stay under the cap.

The below table shows you how much you can contribute, depending on your balance. As you can see if you have a total super balance of below $1,480,000 you can contribute $330,000.

Question 3. My 82-year-old mum is selling her home and moving in with me so that I can care for her as needed. She has been on the aged pension since eligible. Her plan is to buy into my home, firstly by paying off my remaining mortgage and secondly by having some minor renovations done to my home to make it more liveable for her. I will then add her to the title of my property as an equal owner alongside myself.

She is using a local lawyer to have her will rewritten to ensure that myself and my siblings are fairly included in any inheritance when she dies. Any money mum has after buying into my house etc, she will keep in an investment account. She understands that this money will affect her pension.

What she (and I) are concerned about is whether Centrelink will see her buying into my house as her purchasing a house after selling hers. She has attempted to confirm this with Centrelink but has received different answers, or sometimes no answer at all, when she has called to ask this question.

We are moving ahead with the plan as it makes senses on a caregiving and safety level, and are just hoping that financially she will not be penalised by Centrelink. Can you advise, though, whether our assumptions are correct? Thanks.

Generally speaking, Centrelink will treat a person as a home owner if:

  • They (or their partner, or both) have a right or interest in the dwelling in which they live, and
  • The right or interest gives them reasonable security of tenure.

If the above applies, the money spent should not be assessed.

However, there is a possibility it could be assessed under the granny flat provisions and it may affect the age pension depending on how much your mum has contributed.

This is a complicated and personal scenario and unfortunately, I can’t provide you with a definitive answer.

I strongly suggest booking an appointment with a Financial Information Service Officer with Human Services (Centrelink), who can provide you an exact answer and options for your scenario.

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