Plan to work past retirement age? This tool helps maximise your pension

Maximising the age pension is only one factor to consider. Other lifestyle considerations are just as important as financial ones.

Maximising the age pension is only one factor to consider. Other lifestyle considerations are just as important as financial ones. Photo: Getty

Question 1: We have been in a de facto relationship for over 30 years. We own our home jointly and have super funds and shares in our own name. I am of pension age (68) and have retired, drawing down 4 per cent of my super fund per month. My partner is still working full time and is 69. Question is, can I claim an aged pension?

You and your partner would be considered a ‘couple’ by Services Australia (Centrelink). As such, all of your assets and income would be added together when assessing whether you are eligible for any age pension benefits.

As you are both of age pension age, you will both be entitled to the same amount of age pension, whether that is full, partial or nil.

Again, because you are over age pension age, your superannuation and/or pension funds will be counted as assets, as will your partner’s, whether they are in the super accumulation phase or in the pension phase.

These accounts, like all of your financial investments, including your bank accounts and shares, will also be deemed under the income test.

When someone works past the age pension age, they tend to fall under the income test rather than the assets test.

Therefore, a lot will depend on your partner’s salary. On the positive side, you and your partner could benefit from the Work Bonus.

The Work Bonus applies to pensioners of age pension age and encourages them to stay in the paid workforce by reducing the amount of employment income included under the income test.

Under the Work Bonus, the first $300 per fortnight of employment (or self-employment) income is not counted under the income test.

As an example, if your partner earns $500 per fortnight, only $200 will be counted under the income test. The $200 would then be added to your deemed income to determine your eligibility under the income test.

For couples to receive the full age pension, your combined assessable income must be below $320 per fortnight. However, you may still be eligible for a part age pension as long as your combined assessable income is below $3192.40 per fortnight (as at July 2021).

If your income is below or around this level, it might be worth contacting Services Australia to apply.

Question 2: I am 75 and a self-funded retiree. In addition to an indexed pension, which enables us to have a comfortable lifestyle, I have about $900,000 in my super fund, which is in the accumulation phase.

The $900,000 is ‘rainy day’ money, but we have a need of about $80,000 to cover essential house maintenance.

If this amount is withdrawn from the fund, are there any tax implications both now and for my estate? Or would it be better to sell shares which would be subject to capital gains tax?

The vast majority of Australians have their super in a ‘taxed’ superannuation fund, and if they withdraw money from these funds it is paid out tax free.

Several government and corporate super funds are untaxed funds, but depending on the components of your super, there could be tax payable upon withdrawal. You can check this with your fund.

Another factor to consider is whether capital gains tax (CGT) is payable upon withdrawal. I have covered this in detail previously.

Basically, most industry super funds already factor in CGT tax at a ‘fund’ level, which means it is worked out prior to allocating individual net gains and losses to member accounts. It is therefore already reflected in your unit price and no further tax should be applied.

In contrast, many, but not all, retail funds apply this tax at an ‘individual’ level, where the individual capital gains made by the underlying investments within your super are being recorded against your individual account on an ongoing basis.

The trigger to actually pay the gains is when you ‘rollover’ (move to another super fund), make a withdrawal, or switch from your current investment options.

You should check whether any CGT is payable on your super prior to making any withdrawal or rollover.

You could also consider rolling over some or all of your super, currently in accumulation, to pension phase.

I assume you have chosen not to do this to avoid having to draw down on the funds. However, when funds are in the pension phase, they are not subject to CGT, or any earnings tax, whereas funds in the accumulation phase pay CGT of up to 10 per cent and earnings tax of up to 15 per cent.

The superannuation structure is generally very tax friendly, and I would look to retain funds within that environment if possible.

However, you will need to weigh that up against how much CGT you would be liable for by selling shares outside super.

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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