Q: My father, 68 is on the pension and my mother, 65, is not entitled to the pension yet. I have set up a family trust with them as the beneficiaries.
My father has settled a court case related to a work injury and is about to receive a settlement of over $100,000. Will this affect his pension payment and if so what can I do to minimise the effect?
I've heard if the lump sum is directed towards home renovations it won't count for the assets or income test. My father was also considering contributing the money to super - is that possible his age? The other option is to put the entire amount in the family trust. Is this a good idea?
A: As far as I know the compensation payment will not be regarded as income for Centrelink purposes but it's worth checking before you make any decisions. Funds used for home renovations, or travel, will not be counted by Centrelink for pension eligibility.
Your father would not be eligible to put the money to superannuation unless he passes the work test which means working 40 hours over 30 consecutive days in the financial year he makes a contribution.
In any event, unless he has substantial other assets I doubt the benefit of placing the money in superannuation. It's difficult to hide money using family trust these days as Centrelink can look behind the trust to establish beneficial ownership of the assets.
If the money was placed in your mother's name in superannuation it would not count until she reaches pensionable age, but that would be a short term strategy given she's 65 now.
Q: I have around $250,000 in super and wish to make a one-off contribution of $45,000. I'm 59 and retired. Do I pay tax on my contribution? When it comes to drawing down on my super will I have to pay tax again? I am on a Disability Support Pension and so don't need to draw on my super now, but my circumstances might change.
A: You could contribute up to $25,000 as a tax-deductible concessional contribution but you will incur 15 per cent entry tax.
Based on what you have told me you appear to be a low-income earner so a tax deduction may be of no use to you, and you may be better off making a non-concessional contribution of $45,000 on which there is no entry tax. Once you reach 60, all withdrawals from super are tax-free.
Q: My wife and I are both retired. My super is with WA Super, my wife's super is with Colonial First State. They are to merge soon. Is there anything to stop us merging our super into one to save on paying separate fees?
A: You are not allowed to have a joint superannuation account - but I suggest you treat this is the perfect time to analyse your superannuation, decide if any life insurance which may be in the account needs to be changed, and analyse what fees you are paying now, and how your fund has performed in relation to its peers.
This is the perfect time to reflect on your retirement strategies, and make changes as necessary.
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