Case study: Optimising superannuation for Centrelink eligibility in Australia

Background

John 67 and Lisa 62 are a retired couple living in Melbourne, Australia. John is considering applying for the Age Pension through Centrelink.

They have accumulated assets over the years and are exploring strategies to optimise their finances and Centrelink eligibility.

Situation

John retired on the 1st of January 2024 with a superannuation balance of $1,000,000. They own one car valued at $40,000, have contents worth $10,000, and $25,000 in a joint bank account. The Age Pension asset threshold for a homeowner couple is $1,012,500[1]. They consult a financial adviser to seek guidance on structuring their superannuation to increase John’s Age Pension entitlement.

Strategy

1. Superannuation Withdrawal: Based on their financial adviser’s recommendation, John decided to withdraw $440,000 from his superannuation before the 30th of June 2024. The amount to be contributed back to superannuation for Lisa. This withdrawal aims to and potentially make John eligible for the part Age Pension.
2. Contribution Strategy: The financial adviser suggests a contribution strategy for Lisa to leverage the Non-Concessional Contribution (NCC) rules and bring-forward arrangement. Before the 30th of June 2024, they will contribute $110,000 to Lisa’s superannuation. Additionally, after the 1st of July 2024, they will contribute the remaining $330,000 to Lisa’s superannuation.

Considerations

1. Centrelink Assessment: John and Lisa understand that Centrelink will assess their financial situation, including the changes to their superannuation and contributions when determining John’s Age Pension eligibility and payment amounts.
2. Superannuation Rules: They ensure that they adhere to the rules and regulations related to superannuation withdrawals and contributions, including Non-Concessional Superannuation rules and the bring-forward arrangement.

Outcome

By strategically withdrawing funds from John’s superannuation and contributing to Lisa’s superannuation, in July 2024. This adjustment in their financial strategy positions John to potentially become eligible for the part Age Pension payment of , providing them with additional financial support during their retirement. This will provide John with a part age pension until Lisa turns age 67. In addition, John will be entitled to the Pensioner Concession Card which will provide him with:

• Cheaper medicine under the Pharmaceutical Benefits Scheme (PBS)
• Bulk-billed doctor visits (depending on the doctor)
• A bigger refund for medical costs once the Medicare Safety Net limit is reached.
• Additional concessions which may include reductions on r:
  • electricity and gas bills
  • property and water rates
  • public transport fare
  • motor vehicle registration.

Once Lisa turns 67, the funds in her Super will be assessed as an asset and count towards the assets and income test. At that point, they may become ineligible for Age pension if their combined assets exceed the assets test threshold applicable at that time.

Conclusion

Optimising superannuation for Centrelink eligibility requires thoughtful planning and adherence to certain eligibility requirements. John and Lisa’s case study underscores the importance of seeking professional financial advice and implementing a strategic approach to enhance their Age Pension entitlement. Through well-timed withdrawals and contributions within the specified rules, they aim to enhance their financial situation while complying with Centrelink guidelines.

[1] As at 20 March 2024

[2] Calculations are based on Age pension rates and thresholds current as at 20 March 2024.

Please remember that this case study is fictional and provided for illustrative purposes only. Always consult with professionals who are knowledgeable about current Centrelink rules and your specific financial situation before making any decisions.