Q: I’m over 65 and a member of a super fund, from which I receive an account-based
A: You will need to check your specific
Superannuation lump sums
Note: As a financial asset, a superannuation lump sum would then be subject to the deeming rules, which means that Centrelink assumes a certain rate of return on that lump sum and that ‘deemed’ return on the lump sums then counts towards the income test. In short, the superannuation lump sum doesn’t count towards the income test, but a deemed rate of return on that lump sum counts towards the Centrelink income test. I explain the deeming rules in the article Age Pension: Deemed income may rise (or fall) with interest rates.
Centrelink used to produce a helpful fact sheet titled ‘Lump sums’, explaining how different types of lump sums are treated for the Centrelink income test but since the Department of Human Services has revamped its website, unfortunately these types of publications have disappeared from the public domain.
Superannuation pensions
You mentioned that you’re receiving a super pension. Pension payments (rather than lump sums) from super pensions are assessed for the purposes of the Centrelink income test, and the value of the pension may count towards the Centrelink assets test. I explain
Background: An individual must satisfy both the Centrelink income test and assets test to be eligible for a full or part-Age Pension. You can find the latest Age Pension rates and the income test and assets test thresholds in the article Age Pension: September 2012 rates now available.
I get the full pension and a modest income stream of $200 fortnight….. and I am living really well and my cat also. My budget is streamlined, I even pay rent; my income is more that my outgoing each month. Carbon tax made not much difference, and my power supplier gives a good contract. I know folks aim at such great amounts of Super to live on, but the pension is great with my modest super stream; forgive me but I can’t see why folks complain. Even in the Super ads on the TV there seems to be a fear presented to self funded retirees, I am not one of course; but a person must have an awful lot of Super not to be able to get the pension; so I take those Super ads with a grain of salt, for if your Super drops down low enough you can get the pension for free. Car registration is free, power companies give a pensioner discount, travel is $2:50 and you can go around all day on trains, buses and ferries too, I mean how much do folks want ? Not to mention other perks of discounts in stores and places. It’s got me beat why folks are not satisfied.
My wife and I are aproaching retirement, the only super we have, will go to pay of the morgage, should we do that, before. or after applying for a age pension
Thank You Chris
Hi Chris
I am not permitted to provide you with such specific advice.
What I can say is that an individual’s home is not counted under the assets or income tests for the Age Pension, but superannuation and cash etc can be counted under the tests. Be mindful that individuals can hold a certain amount of assets, and earn a certain amount of income without it affecting the Age Pension.
I have provided a general response to a question similar to your own in the following article:
http://www.superguide.com.au/superannuation-basics/repay-debts-with-super-then-claim-age-pension
I also suggest you chat to an accountant or an adviser who is familiar with the Age Pension rules for guidance.
Regards
Trish
I agree that a lump sum withdrawn from super AND kept as cash, will be used to deem an income that then counts towards the income test. But that is not the point – in most cases people take a lump sum to buy something (like a new car). So you are just transfering some assets (cash) into other assets (a car) and there is no deeming on a car – in fact it quickly starts to depreciate, so your asset test liability is actually eased!!!
By the way, if you are over 60 and withdawing from a Super Fund in pension phase, there is actually no difference between a pension payment and a lump sum as far as your accounts and the ATO are concerned. Just tell Centrelink it is a lump sum to spend and you are sweet!
David – Actually these are at least three differences between a pension payment and a lump sum withdrawal from an income stream. A pension payment counts towards your minimum required withdrawal for the year to ensure your pension complies with the rules and earnings on the monies funding the pension are eligible for an exemption from income tax. Pension payment must always be made in cash. A lump sum payment is actually a commutation of part of the pension monies back to accumulation phase before the payment is made and this needs to be adequately documented. Lump sum payments do not need to be made in cash, but if you transfer assets eg shares, then CGT may be payable as the shares are transferred from pension phase to accumulation phase before the lump sum is paid out.
You are also suggesting with the ‘just tell Centrelink that it is a lump sum to spend comment’ that on should actively commit fraud!!!
Hi Douglas
Thanks for your question. You will need to confirm your specific situation with Centrelink, but generally speaking the maximum Age Pension entitlement that a married (or de facto) person can receive is half the couple’s rate (as at 26 November 2009 the full fortnightly rate for one member of a couple was $464.20). The single Age Pension ($615.80 per fortnight as at 26 November 2009) is only available to single people, or for couples where one partner is in prison or a psychiatric facility, or where one partner is separated due to illness.
For the purposes of the Centrelink assets test and income test, even when only one member of a couple has reached Age Pension age, the assets of both members of the couple are counted when working out the individual’s Age Pension entitlement. Again, I strongly suggest that you confirm your particular circumstances with Centrelink.
Note that the Age Pension age for women is currently 63.5 years, although that is moving to 64 years from January 2010.
Centrelink has produced a useful document to help anyone considering applying for the Age Pension. You can click on the link below to access the document ‘Information you need to know about your claim for the Age Pension’ http://www.centrelink.gov.au/internet/internet.nsf/forms/ci006.htm on the Centrelink website.
Regards
Trish
Hi there, can assets be split between a wife and husband if the husband is at age pension age (65) but the wife is not, and only the assets in the husbands name be subject to asset or income test for him to receive the single age pension from centrelink?
Generally the only asset in the non-eligible spouse’s name that does not count for the assets test is money in super in the non-eligible spouse’s name. So you can put money into their name.
Hi Pauline, Many thanks for your question. I have added your question the list of questions that I will be answering in due course. I won’t be able to answer immediately because of the number of questions that I receive. Regards Trish
Dear Trish, On establishment of my income stream, why would I nominate my husband as my reversionary. He is the only other member/trustee of the fund. There isn’t anyone else to inherit except our only child who has disabilities. It is not useful to have funds in his name as he does not have capacity to control them and the funds may affect his pension and Disability Services support funding. As sole trustee, and without my placing any restrictions, my husband will be able to do what he thinks best at the time – and we live in changing times. So is there any point in reversionary provisions on our income streams? Are there implications for Centrelink benefits should we not survive the next GFC – financially, that is?
You can’t have a one member SMSF fund with one trustee – you need to convert to a corporate trustee on one person’s death or appoint another person as trustee.
Dear Trish,I see no comparison between the PBS and new work bonus.This government knows full well that people relying mainly on the aged pension will have to work to survive, so why would they pay us. Starvation is a great incentive to work! regards Ron