I’m sorry to read about your circumstances. SuperGuide is an information site rather than an advisory site so I am unable to advise you on your best option. What I can do however is provide you with some information and pointers for seeking further assistance.

Who can help you?

The following services or professionals may be able to assist you with your decision:

• Financial Information Service. A free government-funded service run under the banner of Centrelink, but you don’t have to be in receipt of a Centrelink benefit to use this service. (click here for more information or telephone on 13 23 00)
• Financial Counselling. You can access free financial counselling to help you manage your day-to-day finances from a financial counsellor. The Australian Securities and Investments Commission (ASIC) has a list of the main services across the country. Click here to access the list. http://www.fido.gov.au/fido/fido.nsf/byheadline/Financial+counselling
• Retirement advice from an accountant or fee-based financial adviser. Although a full-blown financial or retirement plan can add up to thousands of dollars, I’d expect any adviser providing preliminary advice on your circumstances would charge no more than a few hundred dollars. If you’re fortunate, some advisers may provide you with a preliminary view for no charge, but that would be unusual.

If you retire, what are the implications?

If you do retire before the age of 60, you’re likely to have to pay some tax on your super benefits. If you retire on or after the age of 60, then you can expect to receive all of your super benefits tax-free (unless you’re a member of one of the older public sector funds). For more information on the tax implications of retiring check out the following articles:

• I’m 59 and I have $180,000 in super. Will my super be taxed?
• Retiring before the age of 60: the tax deal
• Retirement: Taking benefits before the age of 60
• Tax-free super for over-60s

Note: In some circumstances, an individual who retires may, at a later stage, reconsider his or her circumstances and decide to return to work. I explain this possibility in the article Super for beginners, Part 9: If I retire and take my super, can I return to work?

If you retire, your super fund will require you to complete a form that provides evidence of your intention to retire, and proof of your identity.

Note: If you’re suffering mortgage stress, you may be eligible to access some of your super benefits on compassionate grounds which may enable you to reduce debt without retiring, although the access rules are strict. I explain the rules in the article Super for beginners, part 10: Can I use my super to reduce my mortgage?

Related posts:

1. Accessing super early: Not for business debts
2. Super for beginners, Part 9: If I retire and take my super, can I return to work?
3. Retiring before the age of 60: the tax deal

I’m sorry to read about your troubles. Generally speaking, the super rules don’t permit access to super benefits to pay business debts. I have written about this issue in the article No super access for business debts or tax bills.

Note that if an individual is unable to pay a mortgage, and the bank is planning to foreclose, then the individual may be able to access super benefits on compassionate grounds. I also explain this option in the above article. If the Australian Prudential Regulation Authority does permit access to your super benefits, then note that some tax may be payable on the super benefit.

Retirement: Based on my calculations, your age is 57. What this means is that you have reached your preservation age (anyone born before July 1960 has a preservation age of 55). If an individual has reached preservation age and chooses to retire, then such an individual satisfies a condition of release and can access super benefits. Retiring obviously is not an option based on the details of your question.

TRIP: Another alternative for an individual who has reached preservation age is to start a transition-to-retirement-pension (TRIP) which permits you to access up to 10% of a person’s super benefit each year as pension income. Again, after allowing for the costs of setting up a TRIP, the maximum amount that can be withdrawn is probably a drop in the ocean when considering the circumstances that you’re facing.

Note: Generally speaking, superannuation benefits are protected from creditors in the event of a business collapse. The one major exception is where fund members make substantial contributions when a business collapse or bankruptcy is imminent. For more information on this type of scenario, I recommend that you chat to your business adviser.

Related posts:

1. No super access for business debts or tax bills
2. Accessing super early: Living overseas and over the age of 55
3. Accessing super to buy property: part one

At the time of writing this article, four days before the 2010 Federal Election, we are still waiting for the Liberal/Coalition policy on superannuation and retirement. Perhaps they don’t have one. The Liberals have however released a Seniors policy which does allude to some superannuation and retirement policies.

From SuperGuide’s perspective, the highlights from Liberal/Coalition Seniors policy document include:

• Indexing the Commonwealth Seniors’ Health Card income thresholds from 1 July 2011. Note that the income thresholds for the Commonwealth Seniors Health Card (CSHC) have not been indexed for nearly 10 years, which makes this announcement particularly newsworthy. I explain the CSHC in the article Are you eligible for a Commonwealth Seniors Health Card?
• Abolishing the age limit for Superannuation Guarantee (SG) entitlements, from 1 July 2013. Like the ALP’s plan to extend the age limit for SG to 74, this policy change won’t take effect until potentially after the next Federal election. Even so, recognising that SG is a work entitlement regardless of age is clearly a step in the right direction for older workers. I explain the SG rules in the article No SG for over-70s: now, that’s not fair.

The Liberal Party and Nationals have also promised the following changes for Seniors, namely Australians aged 50 and over:

• Seniors’ Employment Incentive Payment. This payment will be paid to employers who hire workers aged 50 or over, provided the jobseeker is currently unemployed and registered with Centrelink, or out of the workforce and registered with Centrelink. The employer must employer the worker for a minimum six months and the employer will receive a one-off payment of $3,250 (equivalent to $250 a fortnight). According to Liberal party documents, around 900,000 Australians aged 50 to 65 would potentially be eligible to be employed under this scheme.
• Consider issuing bonds for terms of up to 30 years. The Liberals believe that the recent market turmoil has created a greater need for certainty of investment returns. The maximum term for Australian Government bonds is 15 years, which “limits the period for which Seniors can make highly secure investments”. The Liberals/Coalition promise to direct the Australian Office of Financial Management to examine using bonds for terms of up to 30 years.
• ‘Safer Seniors’ Programme. The Liberals are going to put aside $7.5 million to allow local councils to apply for grants funding of up to $100,000 a year to supplement existing Senior safety programs run by local councils, or for local councils to establish new programs.
• New Minister for Ageing and Seniors. The Liberals/Coalition intends to appoint a Minister for Ageing and Seniors. The policy paper notes that Canada, New Zealand and Western Australia have ministers responsible for ‘Seniors’.

Related posts:

1. Are you eligible for a Commonwealth Seniors Health Card?
2. Not all super payments count for Seniors Health Card from July 2009
3. Good news: Super pension income excluded from Health Card test

Age Pension rates

Source: Centrelink

Age Pension transitional rules: Due to a tightening of the Age Pension income test from 20 September 2009, the Government introduced a transitional Age Pension rate to protect the entitlements for existing pensioners as at 20 September 2009 (affecting about 30% of Age Pensioners). Without the introduction of a transitional rate, some individuals would have faced a cut in payments. Affected Age Pensioners will remain on the transitional rate (plus allowances) until they are better off under the new rules that came into effect from 20 September 2009.

The new transitional rate is indexed to the Consumer Price Index (CPI) increases in March and September. According to Centrelink, the notional maximum pension for transitional rate pensioners from 20 March 2010 is $634.30 per fortnight for a single pensioner and $1,024.60 per fortnight combined for pensioner couples. This rate excludes Rent Assistance.

Note: If you’re on the transitional Age Pension rate, you will be assessed under the old and new rules, until Centrelink assesses that you will be better off under the new rules. Once Centrelink determines that you’re better off under the new rules, you will then be permanently subject to the new rules. According to one of our readers, his research indicates that most individuals on the transitional Age Pension rate will revert to the regular rates by September 2010.

Age Pension basic rates – transitional rules

Source: The information contained in these tables was sourced from Jenny Macklin’s website. Jenny Macklin is the Minister for Families, Housing, Community Services and Indigenous affairs.

Many of the rates and thresholds that are linked to the Age Pension were also adjusted as on 20 March 2010. Click on this link to find the latest indexed rates (as at 20 March 2010) for the following rates and thresholds:

• Age Pension income test
• Age Pension assets test
• Pension Bonus Scheme
• Allowances
• Rent assistance

Related posts:

1. Age Pension: September 2009 rates and thresholds now available
2. New income test for Age Pension
3. Age Pension: I have moved states. Do I get the same amount of pension regardless of where I live?

Trish’s response: You will need to check your specific Age Pension entitlements with Centrelink, but my understanding is that a lump sum withdrawn from a super fund is considered an ‘exempt lump sum’ for the purposes of the Centrelink income test. What this means is that such a lump sum payment doesn’t count towards the income test, but the amount does count towards the assets test. Centrelink has produced a fact sheet titled ‘Lump sums’ explaining how different types of lump sums are treated for the Centrelink income test.

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 with interest rates.

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 income streams and the Age Pension in the article Age Pension: Is my super benefit counted towards the Centrelink assets test?

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 2009 rates and thresholds now available.

Related posts:

1. Age Pension: Is my super benefit counted towards the Centrelink assets test?
2. New income test for Age Pension
3. Age Pension: Deemed income may rise with interest rates

If you fall into this age group and intend to continue working, and you expect to receive the Age Pension when you do finally retire then you need to be aware that the Pension Bonus Scheme (PBS) closes to new members from 20 September 2009.

The PBS is a scheme to encourage older Australians to defer taking the Age Pension. The scheme pays a tax-free bonus to individuals who work beyond Age Pension age, provided that they qualify for the Age Pension when they eventually retire. The maximum payment available is nearly $35,000 when you defer claiming the Age Pension for five years or more, and you’re eligible for the full Age Pension when you do claim your entitlements.

If you have already registered for the PBS, then the scheme continues to apply for you, subject to meeting the scheme’s work test condition.

Is 19 September 2009 really the last day?

Tricky question: What is not clear from the information available is whether those eligible must register before 20 September 2009, or whether the cut-off date relates to the fact that you must have reached Age Pension age by this date and you can register after this date provided you’re eligible before 20 September 2009. Are you getting a headache? I don’t blame you. This is the problem when the Government makes knee-jerk policy and expects it to be implemented in record time. The rule in place before the Government announced the closure of the PBS, was that provided you registered within 13 weeks of reaching Age Pension age, your registration ran from when you became eligible rather than from when you registered. If you registered more than 13 weeks after becoming eligible, then the PBS ran from the time that you registered.

Now that the PBS is closing to new members, from the information available it is not clear if the 13-week grace period still applies, and whether Centrelink accepts applications beyond 13 weeks of reaching Age Pension age.

In any case, if you’re eligible and interested, I would be hot-footing it to the Centrelink website. The relevant link is here.

Before I trigger a stampede to the Centrelink website, I should note that according to Centrelink, you may be better off claiming a part Age Pension now rather than joining the Pension Bonus Scheme. Centrelink recommends that you make an appointment with a Centrelink Financial Information Service Officer (call 13 23 00) to help you make that decision.

Never mind, you can access the Work Bonus

The Government claims it is replacing the PBS with a new Work Bonus, which means that only half of your first $500 of employment income each fortnight counts towards the Age Pension income test.

The PBS and the Work Bonus are totally different so don’t believe this political spin. The decision to kill the PBS was a budgetary decision and the Work Bonus is a policy softener to distract Australians from the fact that the Government has made the income test tougher for those claiming a part-Age Pension, which also may affect individuals who have registered for the PBS. I explain the changes to the income test, including the Work Bonus, in the article New income test for Age Pension.

So, how does the Pension Bonus Scheme work?

The amount of bonus you can receive depends on how much Age Pension you’re entitled to when you eventually retire. If you’re not entitled to the Age Pension, you receive no bonus. If you’re entitled to a part-Pension, you receive a part-bonus. Further, you must register to become a member of the PBS before your bonus years can start accruing, and you can’t accrue bonus years past the age of 75.

You must satisfy an annual work test (960 hours each year, which is around 18.5 hours each week, on average), although you can work those hours in blocks rather than each week. if you choose.

You must complete a PBS form http://www.centrelink.gov.au/internet/internet.nsf/forms/sa319.htm to register for PBS membership.

You can defer the Age Pension for up to five years and receive up to $34,814.80 as a single person (or up to $29,077.50 each as part of a couple. If you defer for one year, you receive $1,392.60 (or $1,163.10 each tax-free as part of a couple). See table below for full details.

Maximum amount of Pension Bonus payable

Table source: Centrelink (payment rates effective from 1 July 2009)

Note: The amount of Pension Bonus payable has increased taking effect from 20 September 2009, in line with increases to the Age Pension. You can check out the new rates in the article Age Pension: September 2009 rates and thresholds now available.

Centrelink has produced a brochure on the scheme. Click here to access the document.

Centrelink also has a special page on its website devoted to the Pension Bonus Scheme.

Popular questions about the PBS

We have received many questions about the Pension Bonus Scheme including the following:

Q: I have about 5 months before reaching Pension Age and note that the PBS closes on 20/9/09. Is there any way of overcoming the apparent denial of benefit, being so close to eligible retirement age? Like using super to retire on for the 4 months from September?

Trish’s response: You must have reached Age Pension age before 20 September 2009 to be eligible for the Pension Bonus Scheme.

For men Age Pension age is 65. For women, it can be a little tricky because Age Pension age for females is currently 63.5 years which is linked to your birth date. Centrelink is the best place to go for the answer to this question. You can call the Centrelink Customer Service Centre on Freecall 1800 050 004.

Q: I am 62 and don’t see myself retiring in the near future. Should I try and do something now regarding the pension bonus scheme, or is there some other scheme replacing it?

Trish’s response: If you have not reached Age Pension age before 20 September 2009, then the Pension Bonus Scheme is not available to you. The Government has not replaced the scheme with an alternative, although the Government does claim the Work Bonus is the alternative. You can read about the Work Bonus in the article New income test for Age Pension.

Q: I signed up for the PBS at 65. I am now 68 and still working full time. My wife has been retired for 10 years and receives a part Age pension. When I calculate the PBS that I will receive, do I use the single rate or do I use half of the married rate?

Trish’s response: Check with Centrelink, but my understanding is that you receive the partnered rate which is not the same as half the married rate. For example, the single PBS payment for an individual who has worked for, say, 3 years beyond Age Pension age, is $12,533.30, while an individual who is married could receive a ‘partnered’ payment of up to $10,467.90, assuming the individual is entitled to the full Age Pension.

You must lodge your claim for the PBS within 13 weeks of no longer meeting the work test. You can check out Centrelink’s publication on the PBS for more information, but note that this publication does not have the latest payment rates. For the latest PBS payment rates, the most accurate source is the Centrelink website, and I have reproduced the latest rates in the table that appears earlier in the article.

Note: You can receive a personal assessment of your PBS entitlements by calling the Centrelink Customer Service Centre on Freecall 1800 050 004.

Q: Can you give some details on what is replacing the Pensioner Bonus Scheme? I can find very little info on this, and what I have found, where they say the new system will be less complex, is also miserable in comparison. For example, I worked it out that for 5 years under the pensioner bonus scheme you would get $34,000. Under the so called ‘better’ new plan, the maximum I would gain over 5 years is a paltry $7,000!!! Can you give some insight and info?

Trish’s response: Hopefully the commentary above helps you with your question. I agree that the Work Bonus is no replacement for those who would otherwise have been eligible for the PBS, particularly since the income test also becomes tougher from 20 September 2009 (see New income test for Age Pension).

I haven’t seen any calculations working out the financial difference for an individual between the PBS and the new Work Bonus, but if you have calculated it to be that significant in your circumstances, then the Government certainly has been sprung gilding the lily.

Any more questions on the PBS?

You can find more information on the PBS by visiting the Centrelink website. Centrelink has produced its own Q and As explaining the how the Pension Bonus Scheme works. You can access this information by clicking on this link.

Related posts:

1. Generous Pension Bonus Scheme to close 20/9/09
2. New income test for Age Pension
3. More Age Pension for more Australians

You can expect two major changes to the Age Pension income test, taking effect from 20 September 2009.

1. Increase in taper rate for income test

Taking effect from 20 September 2009, the Age Pension will be reduced by 50 cents for every dollar (previously reduced by 40 cents for every dollar) above the income threshold that delivers the full Age Pension income. For couples, the Age Pension will reduce by 25 cents for every dollar rather than 20 cents for each member of a couple. The income threshold allowing the payment of the full Age Pension is currently $142 a fortnight ($3,692 a year) for singles and $248 a fortnight ($6,448 a year) for couples (combined). If you earn income below this income threshold, then the changes to the taper rate will have no effect on the Age Pension payable.

Note: The Age Pension income thresholds, taking effect from September 2009, are now available. You can find the thresholds for the Age Pension income test and assets test in the article Age Pension: September 2009 rates and thresholds now available.

The practical effect of this change is that the more income an individual has, the more dramatic will be the cut in Age Pension, compared to the income test rules in place before 20 September 2009.

Note: Existing Age Pensioners, that is individuals eligible for the Age Pension prior to 20 September, will be assessed under the rules in place prior to 20 September 2009 AND assessed under the new rules. When the new rules produce the same or a higher Age Pension payment, then the individual will be assessed under the new system going forward.

According to the Government, around 70 per cent of all pensioners (including 93 per cent of all single pensioners) will be unaffected by the pension income test change and will move to the new system immediately.

According to Centrelink, if an existing Age Pensioner is worse off under the new rules, then the individual will be paid a transitional Age Pension rate. Any Age Pensioner paid the transitional rate will receive a pension increase of $20.20 a fortnight (singles) or $20.30 a fortnight (couples, combined). The new transitional rate will be indexed every six months, and will be paid until an individual’s entitlement is the same, or higher under the new income test.

Note: If you become eligible for the Age Pension on or after 20 September, then you’re subject to the new income test.

Confused? Fortunately, Centrelink has prepared some useful Q and As on the topic. You can access these questions and answers by clicking on the link below:

http://www.centrelink.gov.au/internet/internet.nsf/individuals/ssp_pension_increase.htm#changes

2. Work bonus: Excluding half of first $500 of employment income

In recognition of the fact that many Age Pensioners are forced to supplement the Age Pension with part-time work, the Federal Government has introduced a work bonus for Age Pensioners. If an Age Pensioner receives income from work (not investment income), then only half of the first $500 of gross fortnightly employment income will count for the income test. For example, if you earn $300 in a fortnight then $150 of that $300 is counted as fortnightly income against the Age Pension income test. If you earn $600 in a fortnight, then $350 ($250 +$100) is counted towards the income test.

Note that the work bonus measure is in addition to the normal income threshold for full Age Pension eligibility.

Again, Centrelink has been kind enough to prepare some Q and As on the work bonus. You can access these questions and answers by clicking on the link below:

http://www.centrelink.gov.au/internet/internet.nsf/individuals/ssp_work_bonus.htm

Related posts:

1. Age Pension income test: Does my superannuation lump sum count?
2. Age Pension: March 2010 rates now available
3. Budget flags radical changes to Age Pension

Trish’s response: I can provide you with an overview of how superannuation benefits are treated by Centrelink, although you’ll need to check with Centrelink about your personal situation, and how your super benefits are specifically affected.

You must satisfy both an income test and an assets test to become an Age Pensioner, and the test that gives you the lowest amount of Age Pension is the test that prevails.

If you’re under Age Pension age (65 for men and at least 63.5 for women), superannuation benefits don’t count towards the Centrelink assets test or income test.

If you have reached Age Pension age, and not yet started an income stream, your super account is counted as an asset towards the assets test. For the purposes of the income test, the super account is treated as a financial investment and is subject to the deeming rules, which means a certain rate of return is assumed on your super account regardless of what that super account actually earns for the year. I explain the deeming rules in my article Age Pension: Deemed income may rise with interest rates.

If you have started taking an income stream/pension from your super fund, then how your income stream is treated depends on what type of pension that you run from your fund. If you are running an allocated pension or the newer account-based pension, then all of the account balance counts towards the assets test. If you have an older complying pension or term allocated pension, then you may not have to count any of your pension assets as part of the asset test, or perhaps only half of the assets.

If you have started taking an income stream, for the purposes of the income test, the income that is counted is generally the pension payments received for the year less a deduction amount. You can find more information on how income streams/pensions are assessed for the Centrelink assets and income test on the Centrelink website, in particular, by visiting the ‘income streams’ page, and by checking out Centrelink’s fact sheet on income streams.

Note: Although super benefits may be tax-free on or after the age of 60 (except for some public servants), such benefits still count when assessing whether a person is eligible for the Age Pension test. I also want to flag the confusion from some readers regarding eligibility for the Age Pension, compared with eligibility for the Commonwealth Seniors Health Card (CSHC). The income test for the Age Pension is different from the income test for assessing eligibility for the CSHC. The CSHC is available for senior Australians who aren’t eligible for the Age Pension, and CSHC eligibility is based on a person’s ‘adjusted taxable income’ while the Age Pension income test is based on a special composite of income sources known as ‘income amount’.

Understanding this difference is important because the tax-free income (for over-60s) from super pensions doesn’t count when assessing eligibility for the CSHC (see my article Are you eligible for a Commonwealth Seniors Health Card?), but pension income usually counts when determining eligibility for the Age Pension.

Related posts:

1. Age Pension income test: Does my superannuation lump sum count?
2. Deduction amount still applies for Age Pension income test
3. Good news: Super pension income excluded from Health Card test

Trish’s response: When the deeming rates rise, the deemed income from financial assets counted for the Age Pension also rises, although that’s assuming your assets are still valued at the same level. Clearly, the value of a person’s financial assets can fluctuate as well, depending on the type of financial investments that a person holds.

According to Centrelink, deeming rates are set by agreement between the Ministers for the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), and the Department of Education, Employment and Workplace Relations (DEEWR).

Deeming rates don’t change as frequently as interest rates and the deeming rates are generally lower than term deposit rates.

Centrelink has produced a fact sheet on deeming which you can access by clicking on this link.

Background: You must satisfy both an income test and an assets test to become an Age Pensioner, and the test that gives you the lowest amount of Age Pension is the test that prevails. If you pass the assets test but fail the income test, or fail the assets test and pass the income test, you can’t receive the Age Pension.

If you have financial assets, such as shares or term deposits, you count your deemed income under the income test for social security purposes rather than your actual income. Deemed income is when you assume a rate of return even when that rate isn’t necessarily what you actually earn on your investment.

As at August 2009, you must use the following deeming rates:

• For first $42,000. 2 per cent for the first $42,000 of a single person’s financial investments, and for the first $70,000 of a couple’s financial investments.
• For remaining balance. 4 per cent for the remaining balance of financial investments for a single person or a couple.

Note that since the 2007/2008 year, the deeming rates have halved (from 4%/6% to 2%/4%) due to the falls in interest rates. The asset value thresholds (that is $42,000 and $70,000) used to determine what deeming rate to apply, are adjusted annually on 1 July.

The Centrelink website outlines the definition of ‘financial investments’ for the purposes of the Age Pension income test as follows:

“A financial investment is defined as available money, deposit money, managed investments, listed security, a loan not yet repaid in full, unlisted public security, gold or other bullion and asset-tested income streams (short term). Financial investments also include:

• bank, building society and credit union accounts
• cash
• term deposits
• cheque accounts
• friendly society bonds
• managed investments
• assets held in superannuation and rollover funds held if you are of Age Pension age
• listed shares and securities
• loans and debentures
• shares in unlisted public companies
• gold, silver or platinum bullion.

Financial investments do not include:

• your home or its contents
• cars, boats and caravans
• antiques, stamp or coin collections.”

Related posts:

1. Age Pension income test: Does my superannuation lump sum count?
2. Age Pension: Is my super benefit counted towards the Centrelink assets test?
3. Age Pension: March 2010 rates now available

Trish’s response: I am sorry to read about your cash flow issue. The super rules don’t specifically permit early release of super benefits to pay tax bills or other business debts.

If an individual applied to access super benefits under the severe financial hardship rules because of business debts, the individual’s super fund would knock back the application.

Accessing super benefits due to severe financial hardship

Background: In relation to severe financial hardship, your super fund makes the decision about whether a benefit can be released, and your super fund must ensure that the applicant satisfies certain conditions.

The first step in finding out whether you can access your super benefits is to talk to your super fund. Your super fund must check that you satisfy certain conditions before they can release your super funds due to financial hardship. The conditions are set out in the extract below (source: www.apra.gov.au/Superannuation/Other-Grounds-for-EROB.cfm):

“If you have been receiving an eligible income support payment from Centrelink, you may be able to apply direct to your superannuation fund/RSA for the early release of your superannuation funds.

To be granted an early release under this ground you must:

• be in receipt of a Commonwealth income support payment, and have been so, continuously, for the last 26 weeks; and
• satisfy the trustee/RSA provider that you are unable to meet reasonable and immediate family living expenses.

If you satisfy both of the above, the trustee/RSA provider may, in any twelve month period, release to you one lump sum payment. The lump sum payment will be no more than a gross amount of $10,000 and no less than $1,000 (or the balance of your benefit if it is less than $1,000).

If you are aged 55 years and 39 weeks or more, an alternative, optional, objective test of severe financial hardship may be applied to you. That is, you must:

• have received a Commonwealth income support payment for a cumulative period of 39 weeks after reaching age 55; and
• not be gainfully employed on a full-time or part-time basis on the date of your application to the trustee/RSA provider.

If you satisfy this test, the trustee/RSA provider may release your entire benefit.

In all cases, as part of the objective test, applicants will need to provide the trustee/RSA provider with a letter from Centrelink, the Department of Veterans’  Affairs or a Commonwealth Community Development Employment Project (CDEP) grantee organisation confirming that you meet one of these tests.”

The financial hardship provisions are also explained in the article 12 legal reasons to cash your super, and your super fund should also have more detailed information to assist you.

Compassionate grounds

If the bank is going to foreclose on your mortgage, then you may be able to access your super benefits under compassionate grounds. You then must apply to APRA. Your fund should also have information on this, and you can find additional information on compassionate grounds on the APRA website

I wish you the best of luck.

Related posts:

1. Accessing super early: Not for business debts
2. Accessing super early: Unemployed and in financial hardship
3. Super for beginners, part 10: Can I use my super to reduce my mortgage?

A. What is the Commonwealth Seniors Health Card (CSHC)?

The CSHC gives you access to cheaper prescriptions via the Pharmaceutical Benefits Scheme, bulk-billing rates for doctor appointments, and an increase in benefits for medical expenses above a certain threshold via the Medicare Safety Net. As a CSHC holder you can also travel on the Ghan, Indian Pacific and the Overland rail services at concessional rates. Depending on the state that you live in, you may also be entitled to concessions from your state government and from some private businesses. You can find out about the other discounts that you’re entitled to by reading Centrelink’s guide to concession cards.

B. Who is eligible for the Commonwealth Seniors Health Card (CSHC)?

The CSHC is available to Australians of Age Pension age or older (at least 65 for men and currently at least 63.5 years for women). An individual can apply for a CSHC if they earn an adjusted taxable income of less than $50,000, or $80,000 for a couple. ‘Adjusted taxable income’ is an individual’s taxable income plus net rental property loss, foreign income not normally taxed in Australia, and employer-provided fringe benefits (if worth more than $1,000).

Any super benefits paid to individuals aged 60 or over are tax-free and, importantly, do not form part of an individual’s taxable income. As a consequence, the removal of super benefits (from a taxed source) from the income tax system since July 2007 means that a greater number of retirees are eligible for a CSHC.

For the 2008-09 year, salary sacrificing didn’t count when determining eligibility for the CSHC. From July 2009, the definition of income for the purposes of the CSHC, include salary sacrificed contributions. You can confirm your eligibility with Centrelink.

Warning: The one exception to the exclusion of superannuation benefits from taxable income, however, is where an individual receives pension income from an untaxed source, which is the case for some retired public servants. Pension income from an untaxed source is still counted when considering CSHC eligibility for those years because this income forms part of a person’s taxable income. This is another example of retired public servants missing out under the new super rules.

C. What year of income does Centrelink use when testing for CSHC eligibility?

This is where it gets tricky. The income assessment for the CSHC is based on the verified taxable income from the financial year prior to the year the claim is lodged. For example, if the claim is lodged in the 2009-10 year, the CSHC assessment is based on the taxable income for the 2008-09 year. “Verified taxable income” generally means the taxable income shown on a person’s Tax Notice of Assessment.

For the thousands of Australians who have just retired and hoping to receive a CSHC for the first time 2009-10, based on an income that you no longer receive, then your entitlement to the CSHC could be problematic. Fortunately, Centrelink has anticipated this issue. If the verified taxable income for the previous year is above the CSHC income limits, then it is possible for an individual to supply an estimate of their taxable income for the current financial year using the calculation table provided in Centrelink’s ‘Information you need to know about your claim for Commonwealth Seniors Health Card’.

When you do receive your Tax Notice of Assessment for the year that you used for testing your CSHC eligibility, and you discover that your estimate is incorrect and your taxable income is in fact above CSHC income limits, then you must notify Centrelink immediately.

D. Where can I find more information about the CSHC and eligibility?

Your first port of call is the Centrelink website. The website contains plenty of information about the CSHC, or you can contact them by phone on 13 23 00. Check out the following documents:

• A Guide to Centrelink Concession Cards.
• Information you need to know about your claim for the Commonwealth Seniors Health Card booklet.
• Claim for a Commonwealth Seniors Health Card form.

Related posts:

1. Not all super payments count for Seniors Health Card from July 2009
2. Good news: Super pension income excluded from Health Card test
3. Age Pension: Is my super benefit counted towards the Centrelink assets test?

Warning: This question and response is highly technical.

Trish’s response: Yes, the old deductible amount used for tax purposes was calculated differently from the Age Pension deduction amount.

For the benefit of other readers and due to the highly technical nature of this question, I will explain the two rules that you are referring to in your question.

Before July 2007, pension income from super funds was counted in an individual’s taxable income less a deductible amount representing a return of after-tax contributions and other tax-free amounts. After the introduction of tax-free super for over-60s, generally, the annual deductible amount morphed into a proportion of a benefit’s tax-free component on a per payment basis. (For an income stream already in existence, the deductible amount remains until a trigger event occurs, such as turning 60, or stopping the income stream. The tax-free component is then calculated using the undeducted purchase price and pre-July 1983 component). For income tax purposes, the tax-free component is generally only relevant for those individuals taking income streams (pensions) or lump sums, who are:
1. under the age of 60, or
2. receiving benefits from some public sector funds
3. hoping to pass on death benefits to non-dependants.

Individuals applying for the Age Pension must satisfy an income test and an assets test to be eligible for a full or part-Age Pension. If an individual is receiving a superannuation pension, then they are eligible for an exempt amount, commonly known as a deduction amount, which reduces the income counted for the Age Pension income test. The method used to calculate the deduction amount of an income stream depends on the type of income stream that you receive, but for account-based income streams, the calculation generally involves dividing the purchase price (that is, the starting account balance) by the recipient’s life expectancy at commencement of the income stream. The deduction amount for the purposes of Age Pension eligibility is calculated on the full account balance when the income stream starts, and does not change unless you withdraw a lump sum.

In relation to income streams paid from defined benefit funds, the Australian Government’s ‘Guide to Social Security Law’ details the history of the exempt amount for Age Pension purposes applicable to defined benefit funds, and how the deduction amount is calculated for the different types of income streams. Click on the links below (from the Guide to Social Security Law) for information on defined benefit fund calculations.

Income from income streams (Division 1C, Social Security Act 1991)

Income test assessment of asset-test exempt income streams (Guide to Social Security Law)

Note: This is technical stuff so I suggest that you chat with Centrelink if you have any further questions on this issue, or perhaps meet with the free information service run by Centrelink, known as the Financial Information Service. If you have an adviser, then they should be able to take you through these calculations as well.

Related posts:

1. Age Pension income test: Does my superannuation lump sum count?
2. Age Pension: Is my super benefit counted towards the Centrelink assets test?
3. New income test for Age Pension