Finance Your Budget Ask the Expert: Minimum drawdowns and contributing work bonuses to super
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Ask the Expert: Minimum drawdowns and contributing work bonuses to super

financial-planning
Licensed financial adviser Craig Sankey answers your burning finance questions. Photo: TND
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Question: Will getting my super affect the dole? I am 65 and can’t get the pension until I am 66 and a half. I own my own house but have very little in financial assets.

Potentially yes, depending on how much super you have and what you do with the funds.

Funds retained within superannuation are not counted towards income and assets tests for pension and allowance payments, such as JobSeeker (‘the dole’).

Therefore, if you withdraw money from super and put it in your bank account, this could potentially affect how much you receive through JobSeeker, as the funds would be asset-tested and ‘deemed’ under the income test.

If you have a significant amount of super it could mean you lose access to JobSeeker altogether.

Unlike the age pension assets test, which gradually reduces your payments if you go above a certain threshold, the JobSeeker asset test is a ‘hard’ cut off, meaning if you go above a specified level of assets, even by one dollar, you lose all future Jobseeker payments until your asset levels reduce below the threshold again.

But your home is not counted as an asset under the assets test.

The assets test cut off will depend on whether you are single, or a member of a couple, and whether you are a home owner or non-home owner. The current (as at April 2021) level of allowable assets are shown in the table below:

Age pension assets test. Source: Services Australia

If you need to keep access to some funds, you could withdraw a small amount ensuring your total assets are well below the cut-off threshold.

Once you reach age pension age, regardless of whether you keep funds within super, they will be counted by Centrelink under the income and assets test.

Question 2: My husband will get a bonus this year – can he contribute 100 per cent of that bonus before tax into his superannuation fund instead of paying tax on the bonus?

Your husband has two options, both of which will see his super fund deduct 15 per cent tax on his contributions rather than him paying tax at his marginal rate.

Firstly, he could enter into an ‘effective’ salary sacrifice arrangement with his employer, where funds get contributed directly to his super fund.

However, to be ‘effective’, he must enter into the agreement prior to accruing the benefit, in this case the bonus.

Entering into the agreement before he knows the amount of the bonus is generally acceptable. However, if he has already been advised of the amount and payment date of the bonus then this would not be allowed.

The other option is to receive the bonus as per normal but then make a tax-deductible contribution to super. I covered how to do this in a recent article.

Both salary sacrifice and tax-deduction contributions are classified as ‘concessional contributions’. The cap on concessional contributions is $25,000 for the 2020-21 financial year and $27,500 for the 2021-22 financial year (excluding ‘Carry Forward’ provisions).

However, the concessional cap also includes any contributions that your employer is putting into super on your behalf as well, i.e. SG contributions. Any amount above the concessional cap could lead to excess tax and charges.

Your super fund or a financial adviser will be able to provide you with further information.

Question 3: When will the temporary 5 per cent compulsory drawdown of my superannuation return to 10 per cent? 

If you have a superannuation income stream, such as an allocated pension, then you need to withdraw a ‘minimum amount’ each year.

This amount is based on a percentage of your account balance as at July 1 each year and based on your age at that time.

When COVID-19 first hit, many retirees suffered significant losses in financial markets, which had a negative effect on the account balance of their superannuation pension or annuity.

To assist retirees so that they did not have to draw down too much of their super in a down market, the government reduced by 50 per cent the minimum annual payment required for account-based pensions and annuities for the 2019-20 and the 2020-21 financial years.

This is shown in the below table:

Source: ATO

This temporary reduction is due to cease and return to normal in the 2021-22 financial year.

If you have changed age brackets, as per those shown in the table above, then your minimum drawdown may be higher than it was before.

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. 

The New Daily is owned by Industry Super Holdings