Ask the Expert: Claiming carer payments and transitioning to retirement

Licensed financial adviser Craig Sankey answers your burning finance questions.

Licensed financial adviser Craig Sankey answers your burning finance questions. Photo: TND

Question 1: Hi, I am 60. I am a casual employee, a journalist. I owe about $40,000 and would love to be debt free. I am working only about 14 hours a week, which isn’t a lot and isn’t enough for me to get my debt down. I understand that I don’t qualify for a transition to retirement unless I start a new job. That won’t happen. Is there any way I can access part of my super (I have about $288,000) to pay off my debts? Thank you.

Firstly, it sounds like you may have confused when you can access your full super balance and when you can start a transition to retirement pension.

To access your full super balance, as you are over 60, you need to terminate a current employment contract.

If you did leave your current job then all your super would be fully accessible, and there is no compulsion to actually ‘retire’.

However, as you are over your preservation age, you can now already access a transition to retirement pension.

This enables you to move all or some of your existing super balance into a special pension called a ‘transition to retirement’ pension.

It works just like a normal allocated pension, except you can only withdraw a maximum of 10 per cent of your account balance each year.

Therefore, if you moved, say, $280,000 into a transition to retirement pension, you could withdraw $28,000 this financial year.

And from July 1 (next financial year), you could withdraw a further 10 per cent of your account balance. Note that the new 10 per cent amount would be based on your account balance as at July 1.

So, in effect, you could withdraw the $40,000 to pay out your debt in a very short period of time, by starting a transition to retirement pension before the end of this financial year, drawing down the maximum amount available, and then making a further withdrawal at the start of the new financial year.

As you are over 60, all withdrawal/income payments will be tax free.

Once you turn 65, all your super funds will become fully accessible, whether they are in super, or a transition to retirement pension.

Be aware that using your super to pay down debt may not deliver the best long-term financial outcome. It is something you could discuss with a licensed financial adviser, in order to determine an appropriate path forward.

Question 2: [What are the] limits to applying for a Carers Allowance, at present, on a defined superannuation monthly payment and [aged] over 65? 

We have some shares, term deposits, a rental property with no debt and own home. My wife has some serious difficulties now and I stopped work in June 2020 to look after her, but have not applied for the Carers Allowance. Is it still possible?  

If you are caring for someone with a severe disability, with a medical condition, or who is frail aged, there are two main payments you can apply for with Centrelink: The Carer Payment and Carer Allowance.

Both payments have eligibility criteria relating to how much care is required. However, we will look at both payments below:

Carer Payment provides financial help to people who are unable to work in substantial paid employment. This must be because they provide full-time daily care for either someone:

  • With a severe disability or medical condition
  • Who is frail aged.

Carer Payment is paid at the same rate as the age pension, which is up to $952 per fortnight for a single person and $718 for a member of a couple (as at April 2021). It is a lot higher than the Carer Allowance.

The income and assets test are also the same as those for the age pension.

As a home-owning couple, under the assets test you can have assets of $401,500 and receive the full Carer Payment, and assets under $880,500 for a part Carer Payment. Note that all Centrelink assets tests exclude the family home.

Carer Allowance is an income supplement for parents or carers providing extra daily care for either:

  • An adult or dependent child with disability or a medical condition
  • Someone who is frail aged.

The Carer Allowance is a much smaller payment of $131.90 per fortnight. However, there is no asset test and a generous income test of $250,000 per annum. The Carer Allowance is also tax free.

Depending on the type of your wife’s difficulties, she may qualify for the disability support payment, which is paid at the same rate as the Age Pension and Carer Payment.

If you qualify for either the Carer Payment, or Carer Allowance, then you will also qualify for the annual $600 Carer Supplement.

If you qualify for both the Carer Payment and Allowance, then you will receive two $600 payments.

If this sounds like something you should pursue then you can apply through Centrelink.

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

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