Recently my 62-year-old husband, a Vietnam veteran, retired with $615,000 in the Commonwealth Bank rollover fund and $60,000 in superannuation. I am 59 and work part-time, earning $15,000 a year, with $180,000 in superannuation. We have $350,000 in term deposits and at-call accounts. As my husband is not eligible to receive a Department of Veterans' Affairs pension because of the rollover balance, a financial adviser suggested we place it in the cash component of a superannuation fund in my name as my super is not assessed by the department until I turn 65. Is there a strong possibility of a large drop in the value of the $615,000 between these withdrawals and buying into the superannuation in this manner? S.D.

A rollover fund is the same as a super fund; simply an old-fashioned name from the Hawke-Keating days when you could not roll over between super funds. The fund's value will rise and fall regardless of whose name it is invested in, depending on whether it is in a sharemarket option or cash option.

As we have seen in recent months most funds, even those labelled conservative or balanced, contain 20 to 60 per cent equities. To avoid further losses switch the money into a cash fund. If your instructions to your adviser were to help you get a DVA pension, he would meet that request.

Offsetting capital gains

When offsetting capital gains, is a "business loss" the same as an "income loss" for these purposes? We have a number of negatively geared rental properties which have had significant capital gains. I've taken a year off work for family reasons so will have no PAYE income this financial year and maybe next. The net result will be our tax return, without any salary, would show a loss of (say) $50,000. If we then sell a property that we've held for several years and make (say) $100,000 capital gains, how much tax will we pay? My accountant assures me that, after the 50 per cent discount, the taxable capital gains will be $50,000. To then calculate our income tax the method is: Taxable CG (+ $50,000) added to our income (- $50,000) which equals zero. P.H.

The rule of thumb is that a gross capital gain can only be reduced by a capital loss. After this the 50 per cent discount is applied, assuming the assets are held in a private name, and the balance is added to assessable income - which is purely that, assessable income, reducible by deductions and losses.

Opt for large, stay local

I would like to invest $10,000 in two managed funds. Which Australian and international funds would you recommend? N.T.

I like large fund managers and, from a selection of the better performers, select their best funds. I haven't been keen on overseas funds for some time and can't see a reason to change right now. For local funds I like Colonial First State Australian share core fund, while Fidelity's Australian equities fund has been a good performer over recent years. In this volatile market I'd wait a few weeks (or longer). The September-October period often turns out to be a market low.

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.