Finance Your Budget How having an investment property could affect your pension payments

How having an investment property could affect your pension payments

investment property
Licensed financial adviser Craig Sankey explains how having an investment property could affect your pension. Photo: Getty
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Question 1: I am on a part income-based pension. My husband works full-time and I have income from an investment property. If my husband’s income increases, my pension decreases. What happens if I notify Centrelink that the tenants have vacated and I have no rental income?

Centrelink has an income and assets test, and it applies whichever test results in lower pension payments.

Your investment property will come under the asset test regardless of whether it is tenanted.

However, if you have a loan against the investment property, Centrelink will deduct this from the property’s value – i.e. they will use the net value of your asset, but only if the loan is secured by the investment property.

For example, if your investment property is worth $500,000 and the loan is worth $200,000, then Centrelink will count $300,000 under the assets test.

However, if the loan for your investment is secured by your principal place of residence, then you cannot deduct the loan from the value of the investment property.

If the loan is secured by both properties, then Centrelink will deduct a portion of the loan from the value assessed.

Under the income test, if you are receiving no rent, you should inform Centrelink immediately as it will assess no income against the investment property under the income test.

Depending on your overall situation and other assets, you may move from being income tested to asset tested.

In any event, it sounds like you may receive an increase in your pension, and you should inform Centrelink of your updated situation.

Question 2: Hi, I recently arrived in Australia from New Zealand. It took a while to settle in. I want to make the maximum concessional contribution to my superannuation in this financial year to get the maximum tax benefit. Question: What is my maximum amount? Would it be based on when I arrived in Australia or when I gained employment? Thanks

Superannuation contribution caps are based on a financial year, regardless of how long you have been in the country or how long you have been working.

For the 2021-22 financial year, the concessional (tax-deductible) cap is $27,500.

This cap includes employer contributions, salary sacrifice contributions and personal contributions for which you claim a tax deduction.

On top of this, you could also potentially use ‘carry-forward’ contributions. The carry-forward arrangements involve accessing unused concessional cap amounts from previous years. People build up an unused amount of concessional contributions when they make less than the permitted amount in a financial year.

Even if you were not in Australia in previous years, you can still utilise this rule. I have previously detailed how this strategy could work.

I suggest setting up a MyGov account and linking this to the ATO’s online service. This way, you can keep track of your concessional contributions, and how much you can contribute without breaching your cap.

A number of industry super funds offer advice on super contributions at no additional cost, so it may be worth getting in touch with your fund to see if they can help determine an appropriate level of contribution.

Question 3: My daughter is an Australian citizen working in Singapore. Can she make (voluntary) contributions to an Australian superannuation fund?

The short answer is yes.

Anyone under age 67 can make a voluntary contribution to super, regardless of whether they are in Australia. You should, however, ensure the TFN is recorded on the account.

Your daughter’s living arrangements will also have no effect on when she can access her super. The same access rules will apply regardless of whether she is living overseas.

If your daughter was thinking of making pre-tax or tax-deductible contributions, she should obtain specific tax advice as this can be very complex.

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