My wife and I are 69 and 68 respectively. We recently downsized and as a result we made a net gain of some $300,000, but combined with our assets and a relatively modest share portfolio of some $70,000, mostly Telstra, we exceeded the $375,000 limit and Centrelink subsequently cancelled our part pension and concession card. We have since applied for a Commonwealth Health Card. Fortunately, I am in receipt of a CPI-linked State Super pension, but we still miss those extra dollars, not to mention the various concessions that came with it. How would you advise us to invest the above mentioned funds? My accountant advised leaving it in the bank until we know what impact the Trump presidency has on the global financial scene and I tend to agree with him. However, the return is small and the temptation is either a conservative managed fund or more blue-chip shares. C.B.
You wouldn't lose a part pension until your assets exceed $821,500 as homeowners, or $1,021,500 as non-homeowners.
![A former Aristocrat employee asks about their employee share scheme.](/web/20170509051846im_/http://www.smh.com.au/content/dam/images/g/t/m/7/4/4/image.related.articleLeadwide.620x349.gvokhe.png/1492663470598.jpg)
If you are comfortable with blue-chip dividend-paying shares, then they represent an opportunity to participate in Australia's long-term economic growth. Remember, however, that any portfolio needs to be well spread and well managed to minimise the volatility. A concentration of Telstra shares would have seen a near 40 per cent fall in the past two years.
My wife and I are in our mid-70s and so far in good health. Our house is worth about $2 million and we have about $530,000 in allocated pensions, and $90,000 in cash and shares, plus a part age pension. Our allocated pension provider confidently tells us that we have enough money to continue to pay us a reasonable allocated pension and with a continued part age pension we should be OK until we are in our early 90s. So far so good. However, a widower friend of ours recently had to go into aged care (Bupa in Seaforth) and it cost the family $1.05 million for a unit plus $53,000 a year in fees. How on earth would my wife and I fund that for one of us or worst case, both of us? L.S.
Quite right. It is a growing problem as the cost of aged care skyrockets, compounded by the new catchphrase "100 is the new 80!" – that is, many are living longer.
People need to shop around to see what their budget can buy. Your friend might have sold his home to finance his move to a high-cost facility. Where a couple decide to both move into a care facility, then selling the home can usually cover the cost. However, where one member of a couple needs care, and the other wants to remain at home, then the cost of care can require a large part of a normal couple's savings.
Government policy is to subsidise "home care packages", thereby keeping people at home for as long as possible, but I suspect there is a growing sense that too large a portion of such packages is being taken in fees.
I am 66, retired, and have a pension account with Unisuper containing around $508,000. I transfer my pension payments to my wife's bank account as we want to leave her Unisuper money in an accumulation account at this stage. After July 1, I think I will be above the $1.6 million limit because of my Commonwealth PSS pension being in excess of $100,000. This means I will have to transfer my Unisuper pension back to the accumulation account, which would attract 15 per cent tax. I was thinking of closing the pension and giving $540,000 to my wife who would then contribute it as a lump sum into her Unisuper accumulation account before starting a pension. When I withdraw the money from Unisuper, would it be tax-free, and would there be any tax or duty on the amount I give my wife? She is 60 and retired Also, would she be able to contribute the $540,000 into her Unisuper account? Then, when she starts her pension, will it be tax-free? P.O.
Being over 65, that is all your super benefits are "non-preserved", you can withdraw your Unisuper benefit with no tax. Australia has no gift duty and, being under 65, your wife is entitled to contribute it as a "non-concessional contribution" with no tax payable on entry into her super fund.
However, it is important that she has made no non-concessional contributions in excess of $180,000 in the past two years (which would trigger the three year "bring forward amount"), and none at all in 2017-18. For example, if she placed $20,000 of the money you have given her this financial year into her super fund, then her "bring forward" amount drops to $520,000, to be placed before June 30. Talk to a Unisuper adviser.
Regarding your defined benefit Commonwealth PSS pension, described as over $100,000, I need to correct a clause in last week's column. Part of your PSS pension consists of your own member contributions plus the employer's 3 per cent "productivity benefit", on both of which tax has been paid. These form a non-taxable portion of your pension when paid to you. Let's say this represents $30,000 of your annual PSS pension.
The remainder of your PSS pension is your "employer component" that stems from the government's revenue each year ie. it has not been put aside each year while you were working so that no tax was paid over the years. This forms the untaxed employer component or "untaxed element" on which you pay tax when you receive your pension, but with a 10 per cent tax offset as you are over 60. Let's say this represents $90,000 of your annual PSS pension.
On July 1, your "transfer balance account" in this example will be ($30,000+$90,000) = $120,000. Hence you are in excess of the cap and all the income above $100,000 ie. $20,000, will no longer receive a 10 per cent tax offset.
If, for example, a person were to receive a $120,000 annual defined benefit pension with no "untaxed element", then you would currently pay no tax when it is received. From July 1, 50 per cent of the amount in excess of $100,000 i.e. $10,000 in this case, would be taxed as normal income.
When I worked for Aristocrat, they had an employee share scheme that gave each employee $1000 of shares annually. The restriction was that you could not sell them for three years or when you left the company. I am now selling those shares and want to know what the cost base date is for capital gains tax calculations. Is it the date they were gifted to me or the date they were released to me? S.S.
ESS schemes have been subject to many changes over the years and thus the date you received each parcel may affect the result, so you really should see an accountant.
That said, if you elected, knowingly or not, to have the discount taxed on receipt, but claimed the $1000 exemption, then no tax was payable that year. The shares are then taken to have been acquired for their market value on the date of acquisition.
If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Financial Ombudsman, 1300 780 808; pensions, 13 23 00.