How can we ensure enough income while caring for my partner after her accident?

Question: I am aged 64 and my partner is 66. Last year, my partner was involved in a serious traffic accident and badly injured. She will need continuing care in our own home.

In the next few weeks, she is likely to receive a payout of several hundred thousand dollars and we will use a large amount of the money to repay what is left on our mortgage. To look after her, I will have to stop work and with what’s left of the payout and my super, I plan to start a pension scheme. Even though the payout is substantial, I am concerned that we will have inadequate income to meet our needs. Do you have any suggestions?

I am sorry to hear of your circumstances.

Your plan to pay out the mortgage is an excellent idea and will reduce your outgoings considerably. It is highly likely that your partner would meet the criteria to qualify for the Disability Support Pension (DSP) and then the age pension when she reaches 67. The amounts received from Centrelink may be affected by the portion of the payout attributable to lost wages.

As she needs continuing care, it is very likely that you would also qualify for the $153.50 per fortnight Carer’s Allowance and the Carers Payment.

The Carers Payment is paid at a similar rate to the DSP.

Because the Carers Payment and DSP are subject to means testing, you might consider placing all or some of the leftover money into a super fund in your name.

That money would be disregarded for means test purposes until you reach 67. This could mean a combined annual income of nearly $49,000 per year from Centrelink alone.

Because you are over 60 and will have satisfied a condition of release for your superannuation by stopping work, you could also access your newly contributed super if required.

In effect, you could top up the Centrelink pension with withdrawals from super.

Be aware however, that when you reach 67, the money in your super will be fully assessable.

Question: I am currently in the highest marginal tax bracket and have a number of term deposits earning various interest rates. I am 59 years old and mortgage free.

A friend has explained to me that there may be tax advantages in placing this cash into super.

Would this be a good strategy because once I turn 60, I understand that I can access my super at any time?

You have correctly identified that there are many super funds that offer term deposits within their investment options. However, be aware that for many of them, the choice is often limited to a handful of banks and a limited range of terms.

The rates on offer rarely reflect what you can obtain as a retail investor. Also be aware that because the trustee is regarded as a single entity, collectively all the term deposits probably exceed the $250,000 threshold for the Financial Claim Scheme guarantee to apply.

In simple terms, that means that the Government deposit guarantee scheme is unlikely to apply.

By placing the money into super as a concessional contribution, you may be able to claim a tax deduction for the contribution although a contributions tax of 15 percent will apply.

If your adjusted taxable income exceeds $250,000, the contributions tax would increase to 30 percent, but that is still significantly less than your marginal tax rate of 47 percent, including the Medicare levy.

You would be restricted to the annual $30,000 contribution cap or limit which includes what your employer contributes.

If you make a non-concessional contribution, where no tax deduction is claimed, no contributions tax is deducted.

While there is a $120,000 per annum limit with non concessional contributions, you can probably make use of the “bring-forward” rule, which will allow you to contribute 3 years worth of contributions in a single year or $360,000.

One final point. Your understanding of the accessibility rule is slightly incorrect.

To access superannuation, you will need to have “ceased gainful employment since turning 60”.

That condition does not require you to cease all employment after turning 60. You could for example, start and cease a part-time job after reaching 60 and that would satisfy the condition of release.

For more finance related questions, learn more here. 

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.