How to use your superannuation to boost your Centrelink benefits

When planning for retirement, two key pillars we often lean on are superannuation and Centrelink.

Superannuation is widely regarded as one of the most tax-effective structures to build wealth for retirement. Investment earnings are taxed at a maximum of 15 per cent while your super is accumulating, and there is no tax on earnings once you enter the “Retirement Phase” via an income stream after age 60.

Outside of the tax advantages, superannuation can also be used to improve your eligibility for a benefit from Centrelink. Superannuation in the accumulation phase is not assessed by Centrelink until you reach Age Pension age, which for the uninitiated, is 67. Here lies an opportunity to add money to superannuation to hide money from Centrelink means testing.

As a practical example, let’s use a couple where one member is 67 and the other is 62. By adding money to the superannuation (accumulation) fund of the younger member, the older partner can benefit from an increased Age Pension payment.

A similar strategy can be implemented for someone who retires before reaching Age Pension age and needs support from Centrelink.

Let’s say a single person aged 62 had retired and began drawing a regular income (account-based pension) from their Superannuation. By rolling back all or part of their superannuation pension to accumulation, the retiree may improve their eligibility for benefits like JobSeeker or the Low-Income Health Care Card.

Before considering a strategy of adding to superannuation, it’s important to consider:

• Transaction costs – be aware of any costs associated with selling assets before adding to superannuation
• Access rules – understand that Superannuation has strict access rules. Ensure you meet the access eligibility criteria or leave money elsewhere that is readily available
• Contribution limits – there are annual limits on how much you can contribute to superannuation, and
• Tax implications – understand the tax implications of having your superannuation in accumulation instead of pension phase.

These costs and tax differences can reduce part of your overall gain from using this strategy.

It’s always a good idea to seek professional financial advice to tailor these strategies to your specific situation and maximise your Centrelink benefits.

Do you have any questions or scenarios you’d like to discuss further? Please join Muirfield for a free retirement workshop at Kurrambee Myaring Community Centre on October 24.

For more information and to book a spot, phone 5224 2700.