Q: My husband is 67. He retired at 55 and currently receives the Age Pension. I am 61 and I retired at 60, so I still have five more years before I am eligible for the pension. My husband lived off his super for 10 years before claiming the Age Pension so the remaining balance of $54,000 is now classed as an asset with Centrelink.
My super balance of $65,000 is not yet assessed as an asset because it is still in the growth phase (I deposit $1,000 every year to get the government co-contribution of $500). I would like to roll my husband’s super into mine and take a lump sum each year of $12,000 until I’m eligible for the pension.
Are there any restrictions, tax implications or Centrelink implications to doing this? We have savings, own two properties and are debt-free.
A: I’m assuming your husband isn’t receiving a full Age Pension because of the level of your combined income or assets. If that’s the case, what you’re suggesting makes sense. It’s what financial planners call ‘the benefits of having a younger spouse strategy’.
You can’t actually ‘roll’ his super into your account, because rollovers can only take place between accounts held by the same person. What you could do his ask him nicely to take his money out of super (the entire withdrawal should be tax-free, with no negative Centrelink consequences) and make what’s called a ‘spouse contribution’ to your account.
Or he could give the money to you (Centrelink’s gifting rules don’t apply between couples) and you could use it to make a super contribution yourself.
Which way to go? That depends on your tax position, and it may be a combination of spouse contributions and personal contributions works best. Your accountant should be able to help here, and it’s possible there’s a benefit in claiming part of your contribution as a tax deduction.
There are limits to how much you can pay into super in a given year (called concessional and non-concessional contributions caps), but I’ve assumed you haven’t been putting money into your account with the exception of the $1,000 to take advantage of the government co-contribution.
Another thing to consider is estate planning, particularly if you or your husband have nominated beneficiaries for your super accounts. If you’re not sure, check with your funds before doing anything or have a talk to a solicitor who specialises in estate planning.
Oh, and a final thing! If you’ve got savings outside super, consider the advantages of making additional super contributions (which will reduce assessable income and assets for Centrelink purposes), because that could increase your husband’s Age Pension even further.