Unlock hidden funds: Financial expert gives insights on boosting your retirement savings!
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Navigating the financial landscape in retirement can be a complex affair, especially when it comes to understanding the various tax offsets and benefits that could save you money.
For self-funded retirees, every dollar counts, and there's a little-known tax secret that could unlock hidden funds for those in the know.
A financial expert sheds light on the Seniors and Pensioners Tax Offset (SAPTO), a potential game-changer for those who qualify.
Nick Bruining answered a series of questions that could help seniors navigate this little-known game-changer of a fund.
Question 1:
‘My wife and I are in the process of doing our tax return online through myTax but we’re not sure whether we qualify for the seniors and pensioners tax offset?
We are both self-funded retirees aged 69.
The eligibility states: “You were age-pension age and eligible for an Australian Government age pension during the income year, but you didn’t receive it because you didn’t make a claim or because of the income test or assets test.”
Does this mean that even though we have too many assets to get the aged pension we can still claim the offset?’
Answer:
According to Mr Bruining, if this is the case, yes, you can qualify for SAPTO if your income falls below the specified limits.
‘Income for the offset is called “rebate income”. Rebate income is the total sum of an individual’s taxable income, reportable superannuation contributions, total net investment loss and adjusted fringe benefits,’ he explained.
‘Taxable income includes wages, income from investments, foreign income, capital gains, some pension payments and all of that, less allowable deductions.’
‘Net investment loss requires you to add back any losses associated with strategies like negative gearing, and reportable superannuation contributions are essentially those concessional contributions you may have made voluntarily, whether through salary sacrifice or personally deducted contributions. Non-concessional contributions are ignored,’ Mr Bruining added.
He noted that for 2024/25, SAPTO is $1602 per member of a couple and explained that if rebate income exceeds $30,994, SAPTO starts to decrease at a rate of 12.5¢ per $1 until it phases out completely at $52,759.
Different rates and thresholds apply to those separated due to illness.
Mr Bruining also said partnered seniors could transfer any unused SAPTO to their partner.
For singles, the maximum SAPTO is $2230, with the lower shade-out threshold set at $34,919.
He also mentioned that the Medicare levy does not apply if taxable income is below the shade-out thresholds. The tax application on myGov generally detects SAPTO eligibility and alerts you accordingly.
Question 2:
‘My husband and I have $1,173,000 in super, assets of $10,000 covered under home contents, $12,000 in vehicles, and $79,000 cash in the bank.
We have been told that to get to a level where we would qualify for a pension, we could move $600,000 from our super into an annuity.
Is this wise?’
Answer:
Based on the information provided, Mr Bruining concluded that the total assessable assets of the person who asked the question are approximately $1.274 million.
If they are homeowners, the current upper limit for the asset test is $1.031 million, which means they are about $243,000 over the limit.
‘An annuity may allow you to claim a part-pension. In order to qualify for the special Centrelink treatment, the annuity must comply with specific rules,’ he suggested.
‘In essence, you will need to purchase a lifetime annuity where, in exchange for a lump sum payment, you each receive payments for the rest of your life.’
‘You can tailor the payments to suit your circumstances. For example, you could build in [the] indexation of the payment either to a fixed annual rate or to the consumer price index. You can include a reversionary option where on the death of the primary annuity owner, payments continue to the surviving partner until they die,’ Mr Bruining continued.
According to him, once purchased, the invested capital is typically inaccessible, which is where Centrelink benefits become relevant.
Mr Bruining noted that under the asset test, only 60 per cent of the invested capital is considered, meaning that investing $600,000 into an annuity would reduce the Centrelink-assessable assets by $240,000. This reduction is nearly equivalent to the amount needed to qualify for a Centrelink pension.
Along with the person’s annuity income, they would likely be eligible for the minimum pension payment, which is $87.40 per fortnight for a couple.
‘Whether it is “wise” or not will depend on the total income and other benefits generated by following this strategy, weighed up by the loss of access to the capital sum invested. Other benefits may follow,’ he responded.
‘Providing the annuity has been in place for at least five years, on your 84th birthday, Centrelink will further reduce the assessable amount by 30 per cent—or, in your case and based on $600,000, an additional $180,00.’
‘If you are still being assessed under the asset test at that time, that will mean a significant increase to your age pension of $540 a fortnight,’ Mr Bruining added.
However, he advised caution: if one partner passes away, the surviving partner will be reassessed under the single means test limits. It is likely that the surviving partner will exceed these limits and lose their Centrelink pension.
As self-funded retirees navigate the complexities of tax offsets and Centrelink benefits, recent insights from financial experts shed light on crucial details that could impact their financial strategies.
Understanding these nuances is essential, especially in light of new opportunities for pensioners to potentially receive a significant Centrelink boost.
Exploring these developments further can reveal how strategic decisions may lead to substantial financial benefits for retirees.
Have you taken advantage of SAPTO, or are you considering an annuity to qualify for a Centrelink pension? Share your experiences and insights in the comments below!
For self-funded retirees, every dollar counts, and there's a little-known tax secret that could unlock hidden funds for those in the know.
A financial expert sheds light on the Seniors and Pensioners Tax Offset (SAPTO), a potential game-changer for those who qualify.
Nick Bruining answered a series of questions that could help seniors navigate this little-known game-changer of a fund.
Question 1:
‘My wife and I are in the process of doing our tax return online through myTax but we’re not sure whether we qualify for the seniors and pensioners tax offset?
We are both self-funded retirees aged 69.
The eligibility states: “You were age-pension age and eligible for an Australian Government age pension during the income year, but you didn’t receive it because you didn’t make a claim or because of the income test or assets test.”
Does this mean that even though we have too many assets to get the aged pension we can still claim the offset?’
Financial expert Nick Bruining said self-funded retirees aged 69 may still qualify for the SAPTO despite having too many assets for the age pension. Credit: Shutterstock
Answer:
According to Mr Bruining, if this is the case, yes, you can qualify for SAPTO if your income falls below the specified limits.
‘Income for the offset is called “rebate income”. Rebate income is the total sum of an individual’s taxable income, reportable superannuation contributions, total net investment loss and adjusted fringe benefits,’ he explained.
‘Taxable income includes wages, income from investments, foreign income, capital gains, some pension payments and all of that, less allowable deductions.’
‘Net investment loss requires you to add back any losses associated with strategies like negative gearing, and reportable superannuation contributions are essentially those concessional contributions you may have made voluntarily, whether through salary sacrifice or personally deducted contributions. Non-concessional contributions are ignored,’ Mr Bruining added.
He noted that for 2024/25, SAPTO is $1602 per member of a couple and explained that if rebate income exceeds $30,994, SAPTO starts to decrease at a rate of 12.5¢ per $1 until it phases out completely at $52,759.
Different rates and thresholds apply to those separated due to illness.
Mr Bruining also said partnered seniors could transfer any unused SAPTO to their partner.
For singles, the maximum SAPTO is $2230, with the lower shade-out threshold set at $34,919.
He also mentioned that the Medicare levy does not apply if taxable income is below the shade-out thresholds. The tax application on myGov generally detects SAPTO eligibility and alerts you accordingly.
Question 2:
‘My husband and I have $1,173,000 in super, assets of $10,000 covered under home contents, $12,000 in vehicles, and $79,000 cash in the bank.
We have been told that to get to a level where we would qualify for a pension, we could move $600,000 from our super into an annuity.
Is this wise?’
Answer:
Based on the information provided, Mr Bruining concluded that the total assessable assets of the person who asked the question are approximately $1.274 million.
If they are homeowners, the current upper limit for the asset test is $1.031 million, which means they are about $243,000 over the limit.
‘An annuity may allow you to claim a part-pension. In order to qualify for the special Centrelink treatment, the annuity must comply with specific rules,’ he suggested.
‘In essence, you will need to purchase a lifetime annuity where, in exchange for a lump sum payment, you each receive payments for the rest of your life.’
‘You can tailor the payments to suit your circumstances. For example, you could build in [the] indexation of the payment either to a fixed annual rate or to the consumer price index. You can include a reversionary option where on the death of the primary annuity owner, payments continue to the surviving partner until they die,’ Mr Bruining continued.
According to him, once purchased, the invested capital is typically inaccessible, which is where Centrelink benefits become relevant.
Mr Bruining noted that under the asset test, only 60 per cent of the invested capital is considered, meaning that investing $600,000 into an annuity would reduce the Centrelink-assessable assets by $240,000. This reduction is nearly equivalent to the amount needed to qualify for a Centrelink pension.
Along with the person’s annuity income, they would likely be eligible for the minimum pension payment, which is $87.40 per fortnight for a couple.
‘Whether it is “wise” or not will depend on the total income and other benefits generated by following this strategy, weighed up by the loss of access to the capital sum invested. Other benefits may follow,’ he responded.
‘Providing the annuity has been in place for at least five years, on your 84th birthday, Centrelink will further reduce the assessable amount by 30 per cent—or, in your case and based on $600,000, an additional $180,00.’
‘If you are still being assessed under the asset test at that time, that will mean a significant increase to your age pension of $540 a fortnight,’ Mr Bruining added.
However, he advised caution: if one partner passes away, the surviving partner will be reassessed under the single means test limits. It is likely that the surviving partner will exceed these limits and lose their Centrelink pension.
As self-funded retirees navigate the complexities of tax offsets and Centrelink benefits, recent insights from financial experts shed light on crucial details that could impact their financial strategies.
Understanding these nuances is essential, especially in light of new opportunities for pensioners to potentially receive a significant Centrelink boost.
Exploring these developments further can reveal how strategic decisions may lead to substantial financial benefits for retirees.
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