Question 1: I have never understood the difference between how the age pension is affected if super is left intact or if it is changed to a super income stream. Say my husband and I are both 69 and have $550,000 in super and no other assets or income, what is the difference between drawing out occasional lump sums versus income stream, as far as age pension assessment? If income stream, is the amount in super still counted as an asset?

These days there is no difference.

Centrelink’s treatment of super income streams changed from January 1, 2015 (prior to this there was a complicated formula used to determine how much was counted under the income test).

If you did start an income stream prior to this date it is grandfathered under the old rules, and you should seek advice if intending to change accounts or providers.

As you are both over age pension age, Centrelink doesn’t care whether you leave the funds in the accumulation account or convert the funds to a super income stream, such as an account-based pension.

Under both scenarios the funds will be asset-tested and come under deeming for the income test. In fact, it will also be the same as you cashing the money out and putting it into a bank account, term deposit or managed fund.

Centrelink treats all these types of financial investments the same way. It just makes it a whole lot easier for them.

There are some types of income streams, such as some annuities or lifetime pensions, where you lock away your money, that do provide some favourable treatment under the income and assets test. If interested, you should seek advice on these.

Finally, Centrelink is just one issue to consider.

Many people prefer to convert their super to a super income stream as it’s easier to manage and provides a regular payment, and that is what they were used to when they worked.

Additionally, earnings within super are taxed up to 15 per cent but once you convert it to a super income stream, all earnings are tax free.

Question 2: My partner and I reside in South Australia. We bought an investment unit in Queensland in 2014 when he was still working. He is now retired. The unit is owned 99 per cent partner, 1 per cent me. Done at the time for tax benefits. We have a mortgage on the unit. I was told if he transferred 49 per cent to me in order to own 50 per cent each, we would have to pay capital gains tax. Is this right? The mortgage is in joint names. No money is changing hands. It’s just a percentage transfer. Cathy.

Hi Cathy,

Yes, what you were told appears to be correct.

The property is owned as ‘tenants in common’, which can have as many owners and whatever percentage split you like. Most couples tend to own their home as ‘joint tenants’.

Transferring a percentage of the ownership, even though no money may change hands, does trigger a capital gains tax event. This will be based on the property’s value at the date of transfer. Therefore, you would need to ensure you have enough funds to cover any resulting tax.

You should seek a tax adviser over this.

Another important point to keep in mind is estate planning. If the property was held as joint tenants, when one of you dies the survivor automatically gains full ownership of the property.

However, with tenants in common, this is not automatic. Your share/percentage of the property goes into your estate and is dealt with via your will, so make sure that it also kept up to date.

Question 3: I am a carer in my 60s and look after my adult daughter on a disability support pension. She has no property of her own. I own my own house, have under $100,000 in super, and my assets are under the allowable asset limit to enable a full pension. I would like to purchase land with my combined funds (assets and super) to leave to my other children in my will. Would the purchase of vacant land affect my pension?

I’m not sure from your question whether you are in receipt of the age pension or carer payment?

Regardless, the ‘carer payment’ works in the same way as the age pension, same income and assets test and same rate of payment.

When you say you are in your 60s, have you reached age pension age as yet? Super is not counted until that time.

If you are already age pension age, then it makes no difference under the asset test as the $100,000 would be counted in either scenario.

If you are under the age pension age, cashing out $100,000 and buying a block of land would mean that an additional $100,000 would count under the asset test. However, depending on the level of other assets you have, it may only make a minimal difference to your rate of payment. Or no difference at all.

As of December 2022, a single home owner can have $280,000 in assets (excluding your home) and still receive the full carer payment/age pension. For every $1000 of assets above the assets free area, the rate of payment is reduced by $3 a fortnight

As well as the carer payment, you may also be eligible for the ‘carer allowance’. While this is a smaller payment, there is not assets test applied.

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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