My husband and I are elderly, with three grandchildren under four. We have blue-chip share investments worth $300,000 and would like to leave this money to them in our will and held, maybe in a trust, by their father until they are 30. By that time it should have matured to provide a substantial deposit for a first home for each of them. We don't know the drawbacks from a taxation point of view or any other nasty. Can you suggest any way we can make provision for them? M.H.

Your best option is to leave the children the money in your will, noting it is to be divided among all your grandchildren, not three, just in case more are produced.

This will eliminate any problem involving the high children's tax as, should you relinquish your grip on the perch before they reach 18, they will then be taxed as adults on the income they receive; that is, income from their inherited investments will be tax-free for the first $6000, then taxed at 15 per cent to $34,000.

If you want to stipulate in the will that a testamentary trust is to be set up to guard the money until they turn 30, that may prove restrictive. For example, there may be a property collapse while they are in their 20s when it would be an ideal time to buy but, by the time they reach 30, another boom may have occurred and prices may have doubled. Your best bet is to stipulate that the money be used only to buy a principal residence but at any time deemed appropriate by the trustees or, on turning 18, the grandchildren. Also, the properties should be bought in their name, not in any trust, to minimise any capital gains tax.

Age a crucial factor

I RECEIVE an Emergency Services and State Super (ESSS) pension of $26,000 a year, paying no tax, and I also work casually, earning about $600 a fortnight on which I am taxed, with the $26,000 being taken into account. By June 30, 2008 I estimate I would have received about $32,000 in total. Am I able to make an after-tax payment to my DIY super fund to qualify for the co-contribution, given the two sources of income? D.M.

You don't mention your age, which is a critical factor. While you are under 71, the Government co-contributes $1500 into the super fund account of a working individual (that is,10 per cent or more of your total income must come from employment, or running a business, or a combination of both) who has made a $1000 non-concessional contribution (formerly called an undeducted contribution) and earns less than $30,342 in 2008-09.

For those who earn more, the co-contribution phases out by five cents for every dollar earned until it cuts out completely above $60,342 in 2008-09.

Note that, from July 1, 2009 the definition of income for the co-contribution will include salary-sacrificed contributions to super but not, as far as is known at this time, any super pension.

Sorry, she doesn't qualify

I AM 81 years old and my wife is 69. We are both self-funded retirees and do not work. I have a Defence Force Retirement pension and my wife has a Veteran Affairs pension. We have income from a rental property, from share dividends and from bank interest. We sold an investment property, 90 per cent in my wife's name and 10 per cent in mine. My wife will have a capital gain of $108,000. Can she contribute to a superannuation fund of $100,000 and claim this against the capital gains to reduce her taxation, even though she is not working? D.C.

No. As young as she is, since your wife is over 65 and not able to meet the work test of 40 hours in 30 days, she cannot make a contribution into a super fund.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Helplines: bank ombudsman 1300780808; pensions 132800.