Question 1: I will reach pension age next year. My partner is nine years younger than me. I have around $900,000 in super. My partner has never worked and does not have any super. Can I transfer half of my super to her account, without any implications for tax or the pension?
When one spouse is a few years older than another, the strategy you outlined can be a very effective way of maximising age pension entitlements for the older spouse, at least until the younger spouse also attains age pension age. This is because funds held in super are not counted in the income or asset test until that time.
Funds can be cashed out of your super and re-contributed to your spouse’s super via a non-concessional (after-tax) contribution.
As you are in your 60s, funds withdrawn from your super are tax-free.
The annual cap for non-concessional contributions is $110,000, but you can bring forward up to three future years to make a contribution of up to $330,000, so long as your partner’s total super balance was under the below threshold on the previous June 30:
To get ‘half of your super’ into her account, you could look at cashing out and re-contributing $110,000 to your partner’s super this financial year, and then doing a further $330,000 next financial year, for a combined total of $440,000.
Bear in mind, though, that if you use the three-year bring-forward rule, no further non-concessional (after-tax) contributions can be made into your partner’s super for three years.
There are estate planning considerations to be mindful of when transferring funds from one spouse to another, and so I recommend you seek personalised financial advice prior to transferring super to your partner.
Question 2: I am on the full pension and have inherited $200,000 from my mother’s estate. How much can I share with my children?
You can share whatever you like with them.
However, if you gift away your assets, including to your children, they will be caught under Centrelink’s deprivation rules. And then depending on your overall situation, this could affect your age pension payments.
If gifts of assets exceed $10,000 in a financial year, or $30,000 over any rolling five-financial-year period, the excess amount is still counted as an asset under the pension asset test.
For example, if you give your children $200,000, then $190,000 would still be counted under the asset test for a period of five years before Centrelink stop including it in its assessment.
Once you are entitled to the funds they will be assessed as yours even if you immediately give them away. Therefore, once you are entitled to the funds, your age pension will be adjusted accordingly, whether the funds are kept or gifted.
These rules are designed so that individuals make use of their own assets first, and don’t simply gift them away just to increase their age pension benefits.
It’s also worth noting that the $190,000 would also be ‘deemed’ and counted under the income test as well.
You should give careful consideration before gifting any money, so as not to leave yourself short, as there will be Centrelink implications.
Centrelink will be able to let you know how gifting would affect your situation.
Question 3: Dear Craig, I am due to reach pension age in June 2022. I am divorced and became an Australian Permanent Resident in 2011. I own a farm in Zimbabwe, which, as a result of Robert Mugabe ZANU PF Land Resettlement Program, was taken away from me in August 2002 along with farming equipment and my home and contents.
I was threatened with prison if I ever returned to my property. A court hearing in Zimbabwe confirmed this under Mugabe’s rule. I still hold title deeds in my name. I have not been financially compensated for the loss of assets or property – its value is $US2 million. I do not own a home and my savings are less than $40,000.
As I hold the title deeds for a property I cannot access, will its value be taken into consideration when assessing my pension claim? Thank you, Karen.
Sorry to hear about your situation. In Australia, it’s easy to forget how stable and comparatively fair our financial systems are when compared to those overseas.
Services Australia has some guidelines they need to follow in relation to overseas held assets, and assets that are not easily accessible as well as hardship provisions.
As you have a unique situation, I suggest booking an appointment with a Financial Services Officer, who can let you know what needs to be disclosed and help you apply for maximum benefits.
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.
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