Mum's pension, gifts, and aged care
Question:
My elderly mother is an aged pension recipient. She recently sold her home and moved into aged care.
If she gifts $100,000 to her adult children, I understand Centrelink will continue to recognise this as her asset for five years, so her pension will not increase, but it will not decrease.
Is this correct?
Answer:
This is generally correct, for Centrelink purposes, the $100,000 gift (less the first $10,000 that can be gifted in a financial year), it will continue to be regarded as an asset until five years from the date of the gift.
Your mother's pension may in fact go up as $10,000 in assets is no longer counted if she is assessed under the assets test.
Transition to Retirement Pension - when is it time to move to this?
Question:
I will turn 60 in September. I have heard about the benefits of a transition to retirement pension and I'm considering putting this in place with my superannuation. I will go to four days a week and hope to use TTR to offset the one day loss in wages. Would you recommend this as a tax-effective strategy?
Answer:
I would not call it a tax effective strategy because your fund will still be paying 15% income tax, even though at 60 you'll be drawing a tax-free income. The main benefit of the scheme is that you can gain access to your superannuation without leaving your job. The purpose of the scheme when it was introduced, was to encourage people to stay in the workforce longer.
Does private health insurance get me out of the Medicare Levy?
Question:
I'm looking for advice on the benefits of purchasing private health coverage to avoid paying the Medicare levy surcharge.
I'm single and earning $110,000 a year. I understand that it would be better to pay for private health insurance in order to avoid paying the Medicare Levy surcharge, which begins when income reaches $93,000. However I am intending to put $15,000 into the First Home Superannuation Saver scheme, would this mean that my taxable income will go to $95,000 and I wouldn't receive the same tax benefits as I would otherwise without the $15,000 deposit?
Answer:
It's not that simple. While your taxable income will reduce to $95,000 (after the $15,000 salary sacrifice), your income for the Medicare Levy Surcharge is still $110,000. This is because the definition of income for MLS is taxable income plus "Reportable Employer Super Contributions', which includes salary sacrifice contributions.
Consequently, you will be subject to the MLS, which at $110,000 of income, will be 1 per cent.
You would still benefit from an income tax reduction via the salary sacrifice, but will still be liable for the MLS, unless you take out private health insurance.
- Noel Whittaker is the author of Retirement Made Simple and numerous other books on personal finance. Email your questions to edit@thesenior.com.au
- This advice is general in nature and readers should seek their own professional advice before making any financial decisions.