Q and A with Noel Whittaker
Q WILL my pension be affected if I take out a reverse mortgage? It will be used for home improvements and an update on the car.
A FUNDS generated from the loan for non-assessable assets such as home improvements should not affect your pension. Provided the car replacement does not require a large sum, that should not affect your pension either. Just be aware that the essence of a reverse mortgage is that the interest is not paid but is capitalised – therefore the debt will increase faster and faster as time passes. You have not stated your ages, but a reverse mortgage is best left as long as possible to minimise the compounding effect. If possible, try to negotiate with your family to pay all or part of the interest to stop the debt rising.
Q MY HUSBAND is entitled to apply for the age pension next March at age 65.5 because he was born in late 1952. At the moment he is not getting any payments as he has not worked for six years due to illness but is not able to get a disabilty pension because I work. In January I am going to retire from my job. I will not be eligible for the age pension for another three years. I have $560,000 in my super fund. If I turn this into a fortnightly pension for myself, will my husband become eligible for a part age pension or is it better to leave it and just take lump sums out as needed?
A NORMALLY superannuation is not assessed by Centrelink until the owner reaches pensionable age. However, it becomes assessable immediately you start to draw a pension from it. Your best strategy is to leave the money in accumulation phase and make lump sum withdrawals as needed.
Q I HAVE a government pension of $45,000 and bank interest roughly $18,000 per year; income is $63,000. My tax notification states I have been taxed on the $63,000, but given the tax-free threshold shouldn’t I be taxed on $44,800? I contacted the company that pays my super but its reply said it deducted what the ATO advised.
A I ASSUME the institution that pays your pension is not aware of your other income. But the tax calculation is simple – your total income will be assessed, and the credit for tax already deducted by your fund will be taken into account. You’re not being double taxed.
- Do you have a question for Noel? Send to Q&A, PO Box 130, Wyong NSW 2259 or email edit@thesenior.com.au
A selection of questions will be covered in this column. Personal replies will not be given.