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A financial planner saved this couple $35,000

Financial Planning  |  13/01/2021  |   5 min read

We often talk about the benefits of financial planning, and how it can help you plan your retirement, or assist with tax issues.

To help explain those benefits, we’ll be sharing a series of real case studies, prepared by our planners.

Getting us started is a look at a married couple in their 60s, and how our planner, Jason Cook, helped them receive an additional $9,230 in Age Pension benefits every year. 
 

The scenario: how to maximise Age Pension payments 

Jim and Sarah are a married couple. They’re both retired. Jim (at 66 years) has reached his Age Pension qualification age and is receiving $357 per fortnight in Age Pension entitlements. His super is in an Account Based Pension.

Sarah, at 62, hasn’t yet reached her Age Pension qualification age. She still has her super in a regular accumulation account. 
 

The opportunity: Centrelink asset and income tests

When calculating Age Pension entitlements, Centrelink looks at the balance in an Account Based Pension.

If one partner has not reached their Age Pension qualification age and has funds in a Superannuation Accumulation Account, that balance is not included in the Assets and Income Tests when calculating Age Pension Payments. 

In this scenario we recommended that Jim withdraw $290,000 from his Account Based Pension and deposit it into Sarah’s super account as a non-concessional contribution*. (Note: As Sarah is permanently retired from the workforce and at least 60 years old, she has unconditional access to these funds tax-free if required.)

The transfer of funds means that Jim’s assessable assets are reduced by $290,000, which sees his Age Pension entitlements increase from $357 per fortnight to $712 per fortnight. That’s an extra $9,230 a year for the next five years – until Sarah reaches her Age Pension qualification age.
 

The tax implications: investment earnings in super 

It’s worth noting that there are tax implications for the above scenario. The $290,000 that sat tax free in Jim’s Account Based Pension will be subject to a 15% tax on any earnings in Sarah’s super account.

Assuming she earns 5% in investment earnings on that $290,000 and is then taxed 15% on those earnings it comes out to $2,175 in annual tax.
 

The big picture: more money in retirement 

Taking a step back, we can see that the couple in this scenario qualified for an additional $9,230 in Age Pension entitlements. When you subtract those additional tax obligations, they’re still $7,055 better off each year.

Over the next five years, they could have a net benefit of approximately $35,275 whilst still retaining tax-free access to all their superannuation funds.
 

Speak to a financial planner

If you’re approaching retirement a financial planner can help you better understand your options and recommend the best way to structure your finances. Equip members can speak to one of our financial planners at no additional charge.


Find out more about our financial planning services. 

 

*Note: Sarah is able to make an after-tax contribution of $290,000 to her super account because (1) she hasn’t triggered the $300,000 bring-forward rule in the previous two financial years and she hasn’t made any other after-tax contributions in the current financial year and (2) her total super balance is less than $1.4 million.

This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Togethr Trustees Pty Ltd ABN 64 006 964 049, AFSL 246383 ("Togethr") is the trustee of the Equipsuper Superannuation Fund ABN 33 813 823 017 ("Equip" or "The Fund"). Past performance is not an indication of future performance.

Togethr Financial Planning Pty Ltd (“TFP”) (ABN 84 124 491 078, AFSL 455010), trading as Equip Financial Planning, is licensed to provide financial planning services to retail and wholesale clients. TFP is owned by Togethr Holdings Pty Ltd (ABN 11 604 515 791). You can obtain the TFP Financial Services Guide and/or Privacy Statement by contacting our Helpline on 1800 682 626. This is general information only and does not take into account your personal objectives, financial situation or needs and therefore should not be taken as personal advice.

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