Question 1: Hi Craig, I have retired early in order to take care of my wife. I had a year more to go before I reached the required 66½ but her operation made me retire early.
She has been on part pension for a number of years due to an injury. She is on full pension at the moment, as I no longer work, and has an allocated pension of $212 a fortnight.
Our combined assets including our super is over the Centrelink limit of $884,000.
We have no investment property. We own our house. I have been told that come next July when I reach pension age both of us will lose it … is there any way we can avoid that?
We have no children either so gifting is out, house repairs need to be done … What are the implications if I withdraw $150,000 from my super? Do I have to declare that to Centrelink? Thanks, Hassan
As at January 2022, a home-owning couple can have $891,500 in assets and still potentially be eligible for a part age pension.
However, it’s your overall situation that is important, not just whether you receive an age pension.
The system is designed so that as you draw down on your super and other savings, and once you fall below the above limit, the age pension starts kicking in.
This should give you some comfort knowing that if/when your assets are declining you always have the age pension to fall back on.
If you spend money on home repairs, then this forms part of your home and is not counted by Centrelink.
A lump-sum withdrawal from super is also not assessed and would only be assessed if you left the funds in your bank account or bought another assessable asset with it.
However, I would recommend caution in spending money on things you don’t need in order to receive a higher age pension as this won’t put you in a better overall financial position.
You also have the option of buying an annuity or an ‘innovative retirement income stream’ product (such as a lifetime pension) where potentially only 60 per cent of the purchase price is counted under Centrelink’s asset test.
These products can be complex so I would suggest speaking with a licensed financial adviser.
Question 2: I have an investment property in my name only and I wish to add my daughter as co-owner. Is this a straight-forward procedure and are there any other taxes apart from stamp duty to be paid? I have had the property for seven years and do not have a loan.
When adding a spouse to a property title, many Australian states can waive the stamp duty, however, as you have indicated, when adding other family members it is still payable.
As it 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 whether you want your daughter to have a 50 per cent ownership in the property or a different amount.
In conjunction with this, you need to decide whether the property should be held as ‘joint tenants’ or ‘tenants in common’.
Both parties own the property in equal shares and if one of the owners die then their share will automatically pass on 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 in equal shares or unequally.
For example, you could retain 75 per cent ownership and transfer 25 per cent ownership to your daughter. If either of you die then your will (or your daughter’s will) decides who gets the ownership share.
The transfer process itself is fairly straightforward but you should seek legal assistance and advice from a solicitor.
Question 3: What counts as income and assets for the age pension? Is super in the accumulation phase any different from super in income stream phase? How is a foreign pension treated?
The Centrelink calculator does not seem to specify what to include (when I last looked) and is thus not very helpful. When should super in accumulation be converted to an income stream?
For Centrelink purposes, assessable income includes the following:
Deemed income from financial assets (Banks accounts, term deposits shares). This also includes deemed income from account-based pensions/income streams and super accumulation accounts once you attain age pension ageGross income (salary and wages), including fringe benefits and salary sacrifice. This includes foreign income and pensions (note, however, that there is a work bonus that doesn’t assess the first $300 of income per fortnight)Net income from investment propertiesIncome from boarders or lodgers (unless close family members)Family trust distributions or dividends from private company sharesIncome from certain income streams such as annuities.
Most assets are assessable and considered by Centrelink unless they are specifically exempt.
An asset is defined as any property or item of value that you or your partner owns or has an interest in, including those held outside Australia.
Financial accounts (cash, term deposits, bonds, debentures, shares, managed funds)Superannuation in accumulation phase (if you are over age pension age)Real estate, including vacant land & holiday homesFarms and businesses, including goodwillHome contents & personal effects (Centrelink and DVA assess the value as $10,000 unless advised otherwise. Note it’s the net market value, not the insured value that is assessable)Motor vehicles, boats, caravans etc.Loans, including interest-free loans to family membersAntiques, paintings and collectiblesSurrender value of life insurance policiesMost income streams, e.g. account-based pensions.
Only a very limited range of assets are exempt from the asset test. These include:
Your principal homeExempt income streamsSuperannuation held in accumulation stage (if you are under age pension age)Pre-paid funeralsFuneral bonds up to $13,250Accommodation bonds/refundable accommodation deposits paid to aged-care facilities.
In terms of when to convert your superannuation from accumulation to an income stream, the most obvious answer is when you need to start drawing an income from it.
Another key issue to consider is if you are partnered and one of you is older and attains age pension age earlier than the other.
In these instances, the younger partner may want to hold off starting an income stream from their super so as to shield the funds from the income and asset test so that the older partner can maximise their age pension entitlements.
Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services
Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.
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