Money questions to ask before buying a beach house

We have just returned from holidays and had such a wonderful time that we are thinking of buying a house at the beach. Just wondering if you think that's a good investment.

It would not be my preferred option - there are some serious issues to think about.

The first consideration will be do you keep it for our own use or rent it out. If you don't rent it, you'll be tying up a large amount of capital and, if you have children, you'll find out that you won't be able to go there as often as you'd planned due to school commitments.

Then you will have to decide between leasing it out permanently and making it available for holiday letting. If you go for a permanent tenant you will achieve a regular income, but the trade-off is that you won't be able to use it for the odd weekend. If you opt for casual letting you will need to provide everything from plates to a washing machine, and will have greatly increased wear and tear because of the constant turnover of tenants, few of whom will treat the property kindly.

If you borrow for it, you'll only be able to claim a tax deduction for the rates, maintenance, interest and other expenses if the property is income producing. This means you will have to rent it out. If you decide to keep the peak periods such as school holidays for yourself, you'll be substantially reducing the income because the highest rents are charged in the holiday season. And if you do use the property yourself, you'll only be able to claim a percentage of the costs. For example, if you occupy the property for 13 weeks, leaving it available for the other 39 weeks, you could only claim 39/52 of all expenses.

If this is your second home, remember you can only claim one property as your primary residence and the other is subject to capital gains tax. You can determine which property is your main residence when it comes time to sell one.

If I withdraw all my super at age 61 to buy a four-wheel-drive trailer to live in self-sufficiently, will I be penalised by the age pension system when I reach 65?

For social security purposes, a person is considered a home owner if they are living in a campervan, caravan, transportable home or boat owned or partly owned by themselves. Irrespective of the person's choice of principal home, social security law provides for the exemption of that home from the assets test, regardless of value. If you choose to live in the trailer as your principal place of residence, you would be considered to be a home owner and the trailer would not be assessed as an asset.

I have a unit that we are considering selling. It has been more than 10 years since purchasing. We lived in the unit for a full year before renting it out. It has been rented out since. Is there any merit in moving back in (to claim it as a PPOR) when selling to reduce CGT, or does this simply lengthen the exemption based on the period of time we have lived in it when the CGT is calculated?

Any capital gains tax payable will be apportioned on a pro rata time basis. When you rented the property out it was deemed to be acquired by you at that date for the market value at that date. You can choose to continue to cover the property with your main residence exemption for six years after you moved out, providing you are not covering another property during that time. Nevertheless, the period you lived there at the start is ignored as part of the total days you owned the property. In view of the fact that it has been owned for 10 years, and rented for nine of those years, you would need to start to use it as a your residence for a long time to make a substantial reduction to your capital gains tax.

I am 70, single and work full-time. I have been told there is a seniors tax concession for those working past retirement date. My 2016-2017 tax return was done by a qualified tax accountant and I only received a rebate of $170. I believe the Tax Office concession is $900+ so am wondering why my rebate was so small. I paid about $10,000 in tax and my gross earnings were about $55,000. I would appreciate clarification.

You are probably referring to the Senior Australian Pensioner Tax Offset (SAPTO) which is available to many Australians who have reached pensionable age. However, the offset tapers as income increases and, for singles, cuts out at $50,119 a year.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice before making decisions. Twitter: @noelwhittaker

This story Money questions to ask before buying a beach house first appeared on The Sydney Morning Herald.