In 1991, my son, now 46, was involved in a motor vehicle accident that left him with both physical and acquired brain injuries. He is receiving "Work Cover" payments since this time, but not any superannuation contributions – meaning that he is not covered by any superannuation. I am a self-funded retiree and with the proposed government changes to super, will exceed the $1.6 million in my fund. I propose to admit my son to my SMSF and deposit, say $540,000 (3 x $180,000) into his account this year as non-concessional contributions. My question is that since he is not working or likely to work again, can I do what is proposed and can he then build on this initial contribution by making concessional contributions in the future? M.J.
I don't know that super may be the best option unless you have no plans to use the money for your son before age 60. The benefits would be "preserved" until then, the only condition of release being the difficult one "on compassionate grounds".
This requires him to get permission for each withdrawal from the Department of Human Services and this is only granted if money is needed for specific expenses that you cannot afford to pay without accessing your superannuation benefits and the expense is unpaid, for example, it is not on a credit card which has ostensibly paid it.
The specific expenses listed in law are either (a) to pay for medical treatment or medical transport expenses for yourself or your dependant if either of you have a life-threatening illness or injury, or chronic pain or mental illness and the medical treatment isn't readily available through the public health system, and you can't pay for the expenses any other way, such as using savings or liquidating assets; or (b) for mortgage assistance (which is unlikely to be a factor in this case); or (c) palliative care expenses if you or your dependant have a terminal illness and need assistance paying palliative care expenses, and can't pay for the expenses any other way, such as by using savings or liquidating assets. (Google "Section 6.19A of the SIS Regulations".)
I suspect you may be better off using a "special disability trust", specifically designed to help people in your son's circumstances. Google "Special Disability Trusts: Questions and Answers" and also look to download the booklet "Special Disability Trusts: Getting Things Sorted" along with a "Model Trust Deed".
I have my money in an industry super fund and in two term deposits in a bank – one in my husband's name and one in my name. After I die, will the super fund and the bank deduct some fees or taxes before paying the money to my beneficiary? Will the beneficiary have to pay income or any other tax from the inheritance? E.N.
When either you or your partner shuffle off this mortal coil, any joint assets automatically go to the survivor without tax. Any assets in the deceased's name bequeathed to the surviving spouse, again pass with no tax payable, although a solicitor handling the estate would charge a fee.
Superannuation benefits do not automatically pass to the deceased's estate as the trustee has the power to pass the benefits directly to a spouse or a child or someone financially dependant on the deceased. However, they will pass to the estate if the deceased had placed a "binding death benefit nomination" in favour of their "legal personal representative" i.e. their estate.
Now super pensions and lumps sum are untaxed when a person over 60 begins to withdraw their benefits. But unknown to a many people, and often not even spelt out on super fund statements, a super benefit consists of: (i) fixed dollar amount called the "tax-free component" consisting of money that you placed in the fund without claiming a tax deduction, i.e. what used to be called an undeducted contribution until 2007 and is now called a non-concessional contribution plus, for oldies, what used to be called the "pre-1983 component" and which was crystallised to a fixed dollar amount at June 30, 2007; plus (ii) a "taxable component" containing everything else.
When a person dies, his or her super benefits can pass untaxed to a spouse, ex-spouse or a child under 18 or a person financially dependent, or one in an "interdependency relationship" at the time. If the money goes to anyone else, including children over 18, it is taxed at 15 per cent plus Medicare. You may have often seen me recommend that people approaching retirement should convert as much taxable component to tax-free component. The final alternative, as long as withdrawals remain tax-free while one is alive, is to ensure that the final survivor does not drop off their twig with money in a super fund.
My wife and I are both still working, part time in her case and full time in mine. We are debt-free, own two houses (one is rented at $535 per week and probably worth $900,000) and plan on being self-funded retirees. I have about $1.1 million in super and my wife has a lifetime indexed Commonwealth super pension. I plan to fully retire by the end of January 2017, when I will be 65 (my wife is 66). My overall health is not great and I would like to qualify for the Commonwealth Seniors Health Card, but don't think that we would ever qualify for the pension. The problem we have is that every financial adviser we have approached is not interested in advising us how to structure ourselves financially to achieve getting the CSHC – purely because we refuse to pay ongoing fees to have them "manage" our finances. Do you have any thoughts on how I can qualify for the CSHC. B.W.
You can qualify for a taxpayer-supported Seniors Health Card by having annual income below $84,472 for couples combined. I estimate that, after you retire, your super, when subject to deeming, and your rent will total about $62,300. If your wife's CSS pension amounts to more than some $22,200, then together you will earn above the CSHC threshold.
I suspect advisers are not disinterested in helping you, its just that you are too rich to receive taxpayer support.
I am a female of 63, and have just retired. My husband is working overseas and a non-resident as he stays less than six months in Australia in a year. He is 62 and preparing to retire in two years. We manage our finances separately. I have $260,000 in super and a share portfolio around $130,000. The dividends yield about $4000 a year. I have paid off my home mortgage and also own an investment property, which brings about $20,000 rental income per year. Am I entitled to an age pension? A.M.
I presume your husband will retire to Australia. Depending on your birthdays, you are eligible to claim at either age 65 or, if after July 1, 1952, age 65.5. From January 2017, a married homeowner couple with combined assets in excess of $816,000 will not be eligible for an age pension, regardless of whether you keep separate finances, so all depend on what assets your husband will add to yours. Centrelink thresholds are indexed regularly and so will doubtless be higher when you reach pension age.
I am 74, my wife is 71, and we own our house. We have an self-managed super fund valued at $640,000 in a corporate name returning about $35,000 a year inclusive of franking credits. Total management and audit fees cost about $9000. My wife has a State Defined Benefit pension of $25,000 per annum. We receive a part pension based on the assets test of $335 a fortnight each. With the recent changes this reduced to about $160 per fortnight each. We currently draw down about $32,000 a year from the SMSF, which will increase when I turn 75. Given the level of the fees and the current value of the fund, would we be better off to close the fund and transfer all the shares etc back into our joint names or still maintain the SMSF? Given the level of income and the availability of the seniors tax offset, I assume we would not need to prepare tax returns other than claim the franking credits. I have a financial background as a CPA and am capable of dealing with tax returns if required. B.K.
Your fees seem unusually high for an SMSF at 1.4 per cent of assets. Rolling over into another super fund, or cashing it in, would see the assets subjected to deeming, possibly affecting the age pension if rates rise. Given that I think its just a matter of time before interest rates start to be raised, taking deeming rates and cash returns with them, you might be better off maintaining your SMSF, but there's not enough information to judge.
I suggest that you shop around the various administrators and see how they compare with yours. Also, being a Certified Practicing Accountant with a financial background, you should be able to run your SMSF without high management charges, using a variety of independent research sources. More than a few SMSF trustees rely on research from brokers' sites, such as Comsec and the like, along with one or more newsletters and, say, an annual trip to a fee-for-service adviser.
I am 64 and will be retiring to Britain next year. I have a superannuation account with UniSuper and I will wish to arrange for fortnightly pension payments from this account. UniSuper tells me that they can only transfer payments to an Australian bank account. My Australian bank account is with Bendigo and they charge a fee to withdraw cash overseas, so if I do it this way I will incur substantial withdrawal fees. I don't want to withdraw all the money ($330,000) to send to a British bank as interest rates are so poor over there (less than 1 per cent). Do you have any suggestions as to how I can access my superannuation periodically from Britain without incurring transaction charges? S.E.
A 2016 comparison of international money transfers from 19 sources, by researcher Canstar, found that fees ranged for nil for online transfers up to $35 each if conducted through a branch. It also points out that there can be a receiving fee at the other end.
Overseas money transfer specialists OFX, TorFX, and UK-based HiFX and World First all promise nil transfer fees and competitive exchange rates, although there are various conditions. Check out their websites and see which one suits you.
If you have a question for George Cochrane, send it to Sunday Money, PO Box 3001, Tamarama, NSW, 2026. All questions answered. Helplines: Financial Ombudsman, 1300 780 808; Centrelink pensions, 13 23 00.