Question 1

• Hi Craig, my wife and I will turn 60 in two years. We have a combined superannuation of $750,000, savings of around $400,000 in the bank and own our house. We want to retire around 61 years of age because of health problems. Can we access all of our super if we decide to retire at this age and just use our super to live on? Or is it better to leave our super in our super funds (to earn interest or something) and just use our savings until we reach the pension age of 67? What is your best advice? Thanks and regards, Barry

Hi Barry,

If you retire at age 61, then you can then do whatever you want with it. Leave it in super, cash it out, convert it into an income stream or a combination of these.

Given you already have a large balance in the bank, I suggest looking at converting your super to an income stream.

Super income streams have tax advantages and can provide you with regular payments. Most people who retire are used to receiving a regular salary payment, and having your superannuation replace this often helps people manage their cashflow.

There are a few different options when it comes to an income stream.

The most popular is an account-based pension. This is highly flexible and there is no maximum limit on how much you can take, but there is a minimum requirement.

For someone under 65 it’s 4 per cent of your account balance.

There is also the option of lifetime pensions or annuities where income payments continue for life no matter how long you live for, with the trade off being you lose access to the funds. Or you could have some in both types of these accounts.

Given you are looking at retiring at 61, your main source of income would be your superannuation income payments.

Therefore, you could look to draw down larger amounts initially, then once you turn age 67 (age pension age) you could reduce your drawdowns as you should be in receipt of a part age pension at that time.

 Question 2 

• The following two questions are in relation to being on the age pension and also having work income. I have answered them together:

A: I have no assets and receive the age pension. If I earn income from mowing lawns, am I able to deduct expenses … and are contributions to superannuation excluded from assessable income?

B: I am 72, on full age pension, and have a casual job earning $350 a week. I am getting conflicting information – by adding my pension and my income together – is this taxed?

You need to declare both the age pension and employment income on your tax return. Whether this results in any income tax will depend on your total income for the financial year.

You can claim tax deductions on your legitimate work expenses on your tax return.

However, a single person on the age pension pays no income tax unless their total combined income is greater than $33,089 (for 2023-24).

So, you would only bother if your income is greater than this as unused tax deductions are not refunded.

Superannuation contributions are not assessed as taxable income.

Question 3

• Can I name my sister overseas as my financial dependent? My sister is 67 years old and she took care of our parents when they were still alive. My parents passed away years ago and since then I have been supporting my sister overseas financially. I would like my entire super to go to her as she is financially dependent on me.

Yes, if your sister is financially dependent on you, she is entitled to be a beneficiary of your super, regardless of where she lives and if she is a resident of Australia or not.

Note there may be tax consequences for her on the payment and you may wish to seek advice over this.

Craig Sankey is a licensed financial adviser and head of Technical Services and 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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