Should I pay off my investment property or add to my super?

I intend to retire in about three years, at age 66. We have an investment property in Townsville that is worth about $540,000 with a mortgage of around $250,000 still to pay. I want to retain this property long term. It is currently neutrally geared. I was thinking to pay the mortgage down before I retire, and then the rental income could be a revenue stream. This would need significant payments of $8000 to $9000 a month to achieve, but is not out of the question. However, I could instead contribute this to my super fund. What would you suggest?

It would be interesting to know your income level to understand whether you have any headroom in your concessional contributions caps, and also the tax consequences of the property becoming positively geared if you accelerate the mortgage repayments.

Absent that detail, my inclination would be to accumulate your savings in super (non-concessional contributions), and then do a lump sum withdrawal back out of your super upon retirement to clear that mortgage. That way the property will remain roughly neutrally geared whilst you are still working, and so have minimal tax consequences for you.

With only three years to retirement, check that your superannuation investment settings aren’t too aggressive. These extra savings that are ultimately intended to clear the mortgage will be invested for a relatively short period, with insufficient time to recover from any sharp market drop.

I am 48 and have $250,000 in super. I have ageing parents in India and would like to retire and go back to care for them when I turn 55. I estimate that I will have $500,000 by the time I turn 55 and will need about $1,000 per month in India. Can I withdraw $1,000 per month from my super after turning 55 and have stopped working?

If you are leaving Australia permanently it is possible to take your superannuation savings with you upon exit, however taxes are applied. Converting it instead to an income stream as you propose would avoid this penalty. You need to wait until age 60 to do this, however.

Once your superannuation savings are in the income stream phase, there is a minimum drawing requirement which must be satisfied each year. It is calculated as a percentage of the balance, with the percentage required to be withdrawn increasing with age. At age 60 you must draw at least 4% of your balance. With a balance of $500,000 this would result in a monthly income of $1,666.

If you leave your superannuation balance to a non-dependent child, will tax be payable on the amount?