My wife and I are in our 50s. Our home is paid for and we are paying off our unit as we want to be debt free. We make extra payments each month so we can have it paid off as soon as possible. People tell us we are silly to pay it off so fast. What do you think?

Paying off the rental property by the time you retire is a worthwhile goal but if either of you earns more than $35,000 a year, you should take advice about salary sacrificing extra funds to super. Such funds lose just 15 per cent entry tax whereas money taken in hand loses at least 31.5 per cent. Once you reach 60 and retire, the extra money you have accumulated in super can be withdrawn tax-free to pay your loan off. Paying the rental property off quickly also means you lose your tax benefits. My strategy enables you to have the best of both worlds.

I have two properties; the first was bought as an investment and the second was our principal home. Due to work commitments we moved to a different town and our principal home then became a rental too. This house has significant equity. If I borrow against it to buy a third property to live in, and then move back to the second property, what is the tax situation?

You can be absent from your residence for up to six years without losing the capital gains tax exemption but you can't claim any other property as your residence in that period. You have six years from the date you moved out to decide if you will sell the second property or move back into it. If you borrow to buy a third house in which to live, the interest wouldn't be deductible because the property isn't income-producing. You will need to decide whether the second or the third property gets the CGT-exemption. If you choose the third, you will be liable for any increase in value on the second from the date you moved out.

I'm 51 and have $700,000 in super, three properties worth $180,000 each, direct shares and a managed fund valued at $455,000. I owe $375,000 on the three properties and repay principal and interest and a $220,000 interest-only margin loan on the shares and fund. My plan is to retire at 60 at the beginning of the new financial year, use my super to pay out my outstanding loans and then live on the income from the investments. As I don't have a principal residence, I could also look at buying a property to live in when I decide where to settle. I don't plan to call on my super until necessary other than to pay out loans, which under the current rules will be tax-free at 60. Following retirement I plan to sell my investments periodically in a way that will minimise capital gains liabilities. Is this a viable plan?

It seems reasonable but you need to consider possible changes to super rules to restrict lump sums and the possibility of a real estate boom in the area you decide to buy into. I'm not concerned the government would restrict lump sum payments to a person over 50 but I suggest you decide soon the locality in which you will eventually live. You could buy a house now and rent it out, to stabilise the buying price and give tax benefits.

On reaching preservation age, 55 in my case, can I withdraw a lump sum up to $150,000 tax-free from my super?

Even though you may have reached your preservation age, you cannot make withdrawals from super unless you cease gainful employment and have signed a statement that you intend to retire permanently.

Noel Whittaker is a director of Whittaker Macnaught. His advice is general in nature and readers should seek their own professional advice. Contact noel.whittaker@whittakermacnaught.com.au.

Questions to Ask Noel, Money, GPO Box 2571, QLD, 4000, or see moneymanager.smh.com.au/sitewide/askanexpert.