Question 1: Hi Craig, I took early retirement to take care of my wife. I still had a year to go reached the required 66½ but his surgery made me retire early.
She received a partial pension for a number of years due to an injury. She is on full board at the moment, as I am no longer working, and she has an allocated board of $212 per fortnight.
Our combined assets, including our super, exceed Centrelink’s limit of $884,000.
We have no investment property. We own our house. I have been told that next July when I reach retirement age we will both lose it… is there a way to avoid this?
We don’t have kids either, so gifts are over, repairs need to be done… What are the implications if I withdraw $150,000 from my super? Should I declare it to Centrelink? Thank you Hassan
In January 2022, a homeowner couple may have $891,500 in assets and still potentially qualify for a part-age pension.
However, it is your overall situation that is important, not just if you are in receipt of an old-age pension.
The system is designed so that when you dip into your super and other savings, and once you fall below the above limit, the old age pension begins to kick in.
This should give you peace of mind knowing that if/when your assets dwindle, you still have the old age pension to fall back on.
If you spend money on home repairs, it is part of your home and not counted by Centrelink.
A super lump sum withdrawal is also not assessed and would only be assessed if you left the funds in your bank account or purchased another taxable asset with it.
However, I recommend that you exercise caution when spending money on things you don’t need to receive a higher pension age, as it won’t put you in a better financial position overall.
You also have the option of buying an annuity or an ‘innovative retirement income stream’ product (such as a life pension) where potentially only 60% of the purchase price is factored into Centrelink’s asset test .
These products can be complex, so I suggest you speak with a licensed financial advisor.
Question 2: I have an investment property in my name only and would like to add my daughter as a co-owner. Is it a simple procedure and are there other taxes to pay apart from the stamp duty? I’ve had the property for seven years and I don’t have a loan.
When adding a spouse to a title deed many Australian states may waive stamp duty, however as you indicated when adding other family members it is always due.
As this is an investment property, you may also be liable to pay capital gains tax on the sale of the transferred amount.
You need to decide if you want your daughter to own 50% of the property or a different amount.
Along with this, you need to decide whether the property should be owned as “joint tenants” or “tenants in common”.
Both parties own the property equally and if one of the owners dies, their share will automatically pass to the other owner (even if you have a will).
This type of agreement is most popular among married and long-term de facto couples.
Tenants in common
You can choose to own the property either equally or unequally.
For example, you could keep 75% of the property and transfer 25% to your daughter. If one of you dies, your will (or your daughter’s) decides who gets the share of ownership.
The transfer process itself is quite simple, but you should seek legal assistance and advice from an attorney.
Question 3: What counts as income and assets for the old-age pension? Is the super in the accumulation phase different from the super in the income stream phase? How is a foreign pension treated?
The Centrelink calculator doesn’t seem to specify what to include (last time I looked) so isn’t very helpful. When should the accumulating super be converted into an income stream?
For Centrelink purposes, taxable income includes the following:
- Presumed income from financial assets (bank accounts, shares of term deposits). This also includes deemed income from pensions/income streams based on super accumulation accounts and accounts once you reach retirement age
- Gross income (wages and salaries), including benefits and wage sacrifice. This includes foreign income and pensions (note however that there is a working premium which does not assess the first $300 of income per fortnight)
- Net income from investment properties
- Income from boarders or tenants (except close family members)
- Distributions from family trusts or dividends from private company shares
- Income from certain income streams such as annuities.
Most assets are assessed and accounted for by Centrelink, unless specifically exempted.
An asset is defined as any property or item of value that you or your partner own or have an interest in, including those held outside Australia.
- Financial accounts (cash, term deposits, bonds, debentures, stocks, managed funds)
- Superannuation in the accumulation phase (if you are over retirement age)
- Real estate, including vacant land and vacation homes
- Farms and businesses, including goodwill
- Home contents and personal effects (Centrelink and DVA assess value at $10,000 unless otherwise noted. Note that net market value, not insured value, is assessable)
- Motor vehicles, boats, caravans, etc.
- Loans, including interest-free loans to family members
- Antiques, paintings and collectibles
- Surrender value of life insurance contracts
- Most income streams, eg account-based pensions.
Only a very limited range of assets are exempt from the asset test. These include:
- Your main residence
- Exempt income streams
- Retirement pension held in the accumulation phase (if you have not reached retirement age)
- Prepaid funeral
- Funeral bonds up to $13,250
- Accommodation bonds/refundable accommodation deposits paid to aged care facilities.
As for when to convert your accrued retirement pension into an income stream, the most obvious answer is when you should start earning income from it.
Another key issue to consider is if you are in a relationship and one of you is older and reaching retirement age earlier than the other.
In these cases, the younger partner may want to delay starting an income stream from their super in order to protect funds from the income and asset test so that the older partner can maximize their age pension entitlements.
Craig Sankey is a Certified Financial Advisor and Head of Technical Services and Advisory Enablement at Industry Fund Services
Warning: The answers provided are of a general nature and although inspired by the questions asked, they have been prepared without taking into account all of your objectives, your financial situation or your needs.
Before relying on any information, please ensure that you consider the relevance of the information to your objectives, financial situation or needs. To the extent permitted by law, no liability for errors or omissions is accepted by IFS and its representatives.
The new daily is owned by Industry Super Holdings