Question 1

• Regarding the recent rule change that allows a person to downsize their home (after 10 years of residence) and deposit the leftover proceeds into super as a concessional contribution: Does the age limit for this remain 75, as with other concessional contributions? Many people wishing to do this may well be over 75.

If you are aged 55 or over, you can contribute up to $300,000 to super under the ‘downsizer’ rules.

If you are a member of a couple, you can both do this, so $600,000 in total.

To be eligible you, or your spouse, must have owned the home for at least 10 years, and for at least part of that period, it must have been your main residence.

To come directly to your question, there is no upper age limit on making downsizer contributions.

So yes, those over age 75 can make this type of contribution. 

In what is somewhat of an anomaly and misconception, you don’t actually need to ‘downsize’ your home.

You could sell your home, buy a bigger and/or more expensive one, and still make a downsizer contribution if you have other available funds lying around.

Downsizer contributions are a special type of contribution. They don’t count either as a concessional or non-concessional contribution, so they can be made regardless of the other contributions caps and restrictions that might apply to making voluntary contributions.

However, you cannot claim a tax deduction on these contributions like you can with a concessional contribution.

To make it even more generous, downsizer contributions form part of the tax-free component of your super fund.

Question 2

• Hi Craig, I am 63 years of age, and planning to retire at the end of this year. My superannuation is with PSS and on retirement can be converted to a defined pension. I am a little confused with the pension payments. It seems to have three parts: A tax-free component, a taxable component already taxed, and an untaxed taxable component. My husband has his own super and we own a small amount in shares and a fully paid-off house. Would I be liable to pay tax on the pension that I will receive? Would be highly obliged if you are able to clarify this for me. Thank you Craig. Cheers, Jayashree

Hi Jayashree,

Yes, at retirement PSS offers a lifetime pension, a lump sum, or a combination of the two.

Depending on the amount of three components, you may have to pay some income tax.

For the untaxed component, this is included in your assessable income and tax paid at your marginal tax rate less a 10 per cent tax offset.

As you are over 60, generally the tax-free and taxable component will be received tax free and are not assessable.

However, if the total annual pension payments is above the defined benefit income cap ($118,750 for 2023-24) then you lose the 10 per cent offset above this amount, and 50 per cent of the tax free and taxable components above this amount also become taxable.

The Commonwealth Superannuation Corporation, which looks after PSS, offers a range of advice and resources to assist.

I suggest you contact it to discuss your situation as these pensions can be complex and they will be able to assist in helping you make the right choice.

Question 3

• I am 80, my wife is 40 and working part-time. My pension has reduced to $60 a fortnight.  Can we separate while living under same roof so that I qualify for individual pension?  

It’s unethical and potentially illegal to try and manipulate the system to artificially obtain additional age pension payments.

Under the social security act you are considered a member of a couple if you are in a relationship with another person. This could be legally married, or in a registered or de facto relationship.

If required, five factors are considered when determining whether a member of a couple relationship exists. These are:

1. The financial aspects of the relationship
2. The nature of the household
3. The social aspects of the relationship
4. Any sexual relationship between the people, and
5. The nature of the people’s commitment to each other.

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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