Understanding the complexities of child support and tax

Q I will soon be 60 and am planning to retire. My income will be a $50,000-a-year tax-free pension from a self-managed super fund. I currently pay child support and want to know if I will continue to be liable when I retire? If the answer is yes, then what is the logic as I have already paid child support on the income that went into super?

A The amount of child support payable depends on the number of nights each parent has their children, the number of children, the age of the children, and the income of each parent. Because the taxable income of an individual can be reduced due to discretionary factors, such as negatively geared investments and amounts contributed to superannuation, various adjustments are made to each parent's taxable income to arrive at the income counted by Centrelink.

One area where adjustments are made is when a supporting parent is retired and receiving a superannuation pension. What must be remembered is that the system is all about ensuring children receive a proper level of support, not what the parents would like to pay.

In arriving at the adjusted taxable income under the child-support formula some tax-free pensions and benefits are added to the taxable income of the relevant parent. This means for someone who is 60 or over and receives an income tax-free pension from a super fund their taxable income could be adjusted.

When the pension received is made up of taxable superannuation benefits the full amount of the pension is added back. Where the pension includes tax-free benefits, usually from after-tax non-concessional contributions, this part of the pension is not added back. This means in your case you will not be paying extra on income contributed to a super fund that was previously counted for child support.

Q I will be 62 in November and want to know when I can apply for a pension from Centrelink? I have about $45,000 in super and would like to withdraw that before leaving

full-time employment.

AIf you are a male you will reach retirement age for the pension when you turn 65, if you are female your retirement age will be 64.5. For both males and females born after July 1, 1952 the retirement age is set to increase in half-yearly increments, which reaches to 67 for both males and females born after January 1, 1957.

To access your superannuation you must meet a condition of release. When someone is under 60 they must retire and not plan to work more than 10 hours a week. People aged 60 to 64 can access their super by simply resigning from an employer. You could resign from where you are working now or start a part-time job then resign from that. The only other way you can access your superannuation if neither of these conditions of release can be met is by starting a transition to retirement pension. This would mean you could draw a pension of up to 10 per cent of your superannuation balance each year.

Questions can be emailed to super@taxbiz.com.au

Self-Managed Superannuation Funds: A survival Guide by Max Newnham, is available in book stores.