My wife is 84 and I am 82. Our combined total assets of bank accounts and superannuation are $998,500. We do not receive any Centrelink benefits but would obviously like to receive some aged pension. We own our own home. Any suggestions?
The cut-off point for the assets test for a homeowner couple is $935,000 – this includes items such as furniture and motor vehicles as well as your financial investments such as money in the bank and superannuation.
You may be able to reduce your assets to become eligible for the pension, but it might not be worth it.Credit:Simon Letch
You could reduce your assets a little by giving away $10,000 a year with a maximum of $30,000 over five years or by spending money on renovations or travel. But in my experience, the tiny amount of pension you may get is hardly worth the effort. Remember, it would take a reduction in assets of $100,000 to get you about $7800 a year in pension, so it would take you almost 13 years to get your money back.
There are also certain income stream products whereby only 60 per cent of the money invested counts for the asset test. But again, you would need to invest say $300,000 just to reduce your assessable assets by $120,000. Based on what you have told me you would qualify easily with the Commonwealth Seniors Health Card which may give you most of the concessions you seek.
My parents are in their mid-70s and retired. Their home is worth $900,000 and has a $100,000 mortgage. They are getting a part pension of about $400 a fortnight each based on assessable assets of $605,000 in super – all in shares. Their shares are providing total dividends and franking credits of $21,000 – a 4 per cent return based on their market value. The interest rate on their home loan has increased from 4 per cent to 6 per cent since May and may get to 7 per cent by June 2023. I believe my parents would be better off by $9000 a year if they sell their worst performing shares and pay off their home loan because their monthly expenses would decrease, and their pension payments would increase significantly which would more than offset any lost dividend earnings. Does this make sense?
What you propose is a great idea. That $100,000 mortgage costs them $6000 a year in interest, and because the mortgage debt is not offset against their funds, hits them with an effective cost of $7800 a year in lost pension. That simple act of using $100,000 of their assessable assets to pay off the mortgage would give them an effective return of $13,800 a year.
I am a 67-year-old pensioner with a small amount in super. I also work on a casual basis with the Education Department earning about $25,000 a year. Can I salary-sacrifice money earned over the allowed $11,800 into my super without it affecting my pension? I have tried to speak to the ATO and Centrelink regarding the matter, but everyone appears to have a different opinion.
The situation is clear. Income for Centrelink income test purposes includes any deductible, concessional superannuation contributions, including salary sacrificed contributions. Therefore, you cannot reduce your income for income test purposes by making such contributions.
My wife’s father died last July. He was living in his own home that was bought in 1997 for $106,000. It is now worth about $575,000. We’re looking at selling the home or renting it out. We have paid our own family home off. We’ve been told that if we sell the home after July 2024 that there will be CGT to pay. Can you please provide us with an estimate of roughly how much that CGT would be? At present, my wife works part-time and earns about $45,000 a year. I work full-time and earn about $111,000. As his will is currently in the probate stage, would it be better for my wife to keep it in her name once she inherits the home for tax purposes?
If the house has not been sold within two years from the date of death you will be liable for CGT for any increase in value from date of death until the present day. Based on the performance of the home to date, and the present state of the property market, this may not be much.
It’s impossible to estimate the CGT as we don’t know what gain, if any, there will be. I think the bigger picture here is whether your wife keeps the house. She could sell it when the estate is being finalised and get about $575,000 free of tax. She would then have the choice of deciding how best to invest: if she keeps the house, she is making the choice that there is no better investment for her than that house.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. Investors should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Noel Whittaker is the author of Retirement Made Simple and numerous other books on personal finance. Email: [email protected]
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