Question 1

My wife and I are fortunate, we both have superannuation paid as a pension. We have both around $300k in super – I have managed funds $242K and she $567K.

We own our principal residence and because we live in a country town with absolutely no amenities we have a small residence in Adelaide (about $500K in value) which we do not rent (we use it for our personal health requirements). What do we need to do to be eligible for a Commonwealth Seniors Health Care Card.

For those that are age pension age but not eligible for the age pension (i.e. self-funded retirees), and hence also not eligible for the pension concession card, the Commonwealth Seniors Health Care Card (CSHCC) is worth applying for as it provides access to a number of federal government concessions including reduced cost medicines.

However, concessions provided by state and local governments vary with the CSHCC.

There is no asset test with this card, only an income test.

Both major parties went to the last election promising to increase the limit on the income test, which has recently just passed into law.

The income test is now very generous, as per below (as at January 2023)

• $90,000 a year if you are single
• $144,000 a year for couples.

Any investment and employment income is taken into account and your superannuation pensions are deemed to earn a certain return, not the actual payments received.

From what you have provided you should be eligible. You can apply via the Services Australia website.

Question 2

I have $400K in accumulative super and $200K in income stream. Do both count as asset? Can I sell my unit and buy a more expensive property by withdrawing a lump sum from my accumulative super account to reduce my assets? Will I qualify for the age pension in doing that?

The $400,000 in accumulation will count as an asset once you attain age pension age.

You could withdraw funds and buy a more expensive property if your only goal was to get the maximum age pension, as your principal home is not asset or income tested. However, this is not always the best strategy.

More important is living in a home and location that you enjoy. You could start drawing down on your super to live a comfortable retirement.

Once your super funds start to deplete, your age pension entitlement starts to go up. That is how the system is designed.

My advice is generally not to have too narrow a focus, whether that be in age pension or tax etc. – take a balanced approach, always keep some funds up your sleeve for emergencies and enjoy your retirement.

Question 3

I’m over 65 and still working part-time. I am considering moving my super into a Transition to Retirement phase account because I understand earnings are not taxed. If I move my super into a Transition to Retirement phase am I required to draw money from it?

Just a couple of points of clarification.

While you may be ‘transitioning into retirement’ by working part-time and possibly starting to draw on your super, as you are over 65 you will have a regular account-based pension, not a Transition to Retirement pension.

I know, it’s confusing.

If you were under 65 you could only use a Transition to Retirement pension, and investment earnings on those are taxed at 15 per cent, the same rate as regular super. Although payments from the pension are tax-free if you are 60 or older.

But as mentioned, as you have attained 65, you can set up a regular account-based pension where indeed all investment earnings are tax-free.

Yes, whether it’s a Transition to Retirement pension or an account-based pension, you are required to draw down at least minimum amounts each year.

The minimum is a percentage of your account balance and is based on your age, as per the table below:

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.

This column also appears in our sister publication The New Daily, which is owned by Industry Super Holdings