Could you clarify something I'm confused about. I thought, irrespective of whether you are income tested or asset tested for the age pension, you could only earn $300 a fortnight as a pensioner couple. We will be asset tested and I have worked out using the superannuation calculator on your website noelwhittaker.com.au that I would probably have about $600,000 in super when I retire. Given those circumstances, could we earn more than $300 a fortnight without our part-pension being affected?
You have highlighted an issue which confuses many people.
The pension eligibility tests work on an asset test and an income test and the one that produces the lowest pension is the one that Centrelink uses.
From 1 July, 2020 a couple can earn $316 a fortnight combined and still be eligible for a full age pension under the income test. Once income exceeds this level, the pension reduces by 50 cents for every additional dollar earned.
The tests are way out of kilter – the lower limit for a homeowner couple for the assets test is $401,500, after which the rate reduces by $1.50 a fortnight each for each $1000 of assets in excess of that threshold.
If we assume your assessable assets are $640,000, which includes your financial assets and items such as vehicles and furniture, you would be eligible for a pension of $708 a fortnight combined.
You could earn a combined income of $1800 a fortnight and still be assessed under the assets test. In short, the income test is not relevant for anybody who is asset tested.
I am aged 51, single and earn $200,000 gross a year. I currently rent and lease out my own home interstate, which is worth $500,000 and has a $200,000 mortgage. I am considering selling this house and buying a flat on the Gold Coast for my retirement in five to 10 years. I have $300,000 in cash and $300,000 equity on my house available for investment. I want to invest in shares via index funds but I am concerned about the changing government super laws and integrity of my defined-benefit company superannuation fund. Should I invest in shares outside super with an equity loan and/or make additional after-tax cash contributions to my super? My super is worth $500,000 and I make the maximum concessional contributions. Should I consider a Self-Managed Super Fund (SMSF) or a fund not associated with my employer?
I suggest you use the best of both worlds.
Continue to salary sacrifice to the maximum amount to your super but keep increasing your net worth by borrowing for assets in your own name and keep them outside the super system.
There are advantages and disadvantages in having your own SMSF – they are canvassed in detail on the ASIC Money Smart website.
A SMSF could be useful if you intend to be an active, do-it-yourself share investor.
I am aged 60 and work full-time. My super balance is $460,000. We have sold an investment property for $950,000. The purchase price was $130,000. How do I reduce my Capital Gains Tax (CGT) bill using super?
This is a warning for anybody to seek financial advice before signing a contract where a substantial amount of CGT may be payable.
The only way to use super to reduce CGT is to make concessional contributions to reduce your taxable income in the year the sales contract was signed.
The problem is that total concessional contributions from all sources cannot exceed $25,000 per person a year.
You use the term "we", so I assume the house was in joint names. Therefore, the gain would be calculated by subtracting the base cost from the net sale price.
On the figures provided, your total gain may be about $780,000, which would be split in half by application of the 50 per cent discount. This means $195,000 would be added to the taxable income of both parties to calculate the CGT.
I assume your employer is making compulsory super contributions for you. If these are $10,000 a year, you only have $15,000 left to make a concessional contribution in your own name – possibly the joint owner could contribute $25,000 if they had no other super.
However, tax deductible contributions won't do much to reduce your CGT.
If I salary sacrifice a large sum of money, can I use this as a lump sum when I retire? Does the money which my employer puts into super have to be used as an account-based pension? Once I have sacrificed money to super, is it out of my control or could I request a large sum in one hit, for example, the cost of a new car, above my agreed allocated pension sum in one year?
Under current rules, you can take all your super as a lump sum once you reach your preservation age and/or satisfy a condition of release if you are under 65. Therefore, there is no reason why you could not make lump-sum withdrawals, as needed, when the time comes.
Noel Whittaker is the author of Retirement Made Simple and numerous other books on personal finance. email@example.com