Policy change hits health-care cards

THE negative impact of a policy change in this year's federal budget keeps broadening. From July 1 next year, tax-exempt superannuation pensions will be counted not only for the super co-contribution and Centrelink benefits, but when assessing a person's entitlement to health-care cards.

THE negative impact of a policy change in this year's federal budget keeps broadening. From July 1 next year, tax-exempt superannuation pensions will be counted not only for the super co-contribution and Centrelink benefits, but when assessing a person's entitlement to health-care cards.

In addition to the low-income health-care card, there is also a Commonwealth seniors health card (CSHC). This is available to people of pension age - 65 for men and 63 for women - who do not receive the pension and with incomes below an annual adjusted level.

The income levels are $50,000 for singles, $80,000 for couples and $100,000 for couples separated due to illness. Where dependent children are involved, the limit increases by $639.60 for each child. The income used for this test is a person's taxable income that is increased for rental property losses, foreign income not taxed in Australia, and for employer fringe benefits. From July 1 next year, exempt superannuation pension income will be counted.

This means that if you are of pension age now, are receiving a superannuation pension and your adjusted taxable income is below the thresholds, you should apply for a CSHC. This will at least give you benefits for the rest of this financial year. These include discounts on prescription medicines, access to bulk billing by GPs, and a reduction in the cost of out-of-pocket medical expenses.

Q: I am 61 and planning to retire at 66. My assets are just above the limit for the age pension due to superannuation. Will I start getting an age pension as soon as the assets fall below the limit set by Centrelink? Is there any way my super could be excluded from the asset test if I retired at 64?

A: If you retired at 64, your superannuation would not be counted in the assets test but you could not apply for the pension as you would not have reached pension age. Once your assets below the assets limit, now $856,509 for a home-owning couple, you could apply for the pension. To qualify, your income would also have to be below the income test level.

Q: I have a self-managed superannuation fund that has been in pension phase for several years. A large percentage of the funds are in equities. Does the law allow the transfer of equities directly from the super fund to myself as payment of all or part of my annual pension?

A: After checking with the Tax Office, there does not appear to be any reason why you cannot take your pension as share transfers. This would appear to open up the possibility of a retirement strategy I have long hoped to implement.

Given that superannuation is required to provide for retirement, I came up with a strategy to warm the cockles of every wine lover's heart. Under this strategy, your SMSF would invest in good-quality wine and then, when a pension was started, bottles would be withdrawn as part of the pension.

This may be possible in theory but there could be a few complications. One would be the requirement to have the wine regularly valued while it was in accumulation phase and also when it was taken as a pension. Another would be the need to keep the super fund's wine under lock and key.

Without this, there would be an increased chance of breaching the superannuation regulation that bans getting an immediate benefit from super. This could occur when a super fund's bottle of wine was consumed by mistake at the end of a too-liquid dinner party.

Questions can be emailed to

max@taxbiz.com.au. Tax for Small Business: a survival guide, by Max Newnham, is now available in bookstores.


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