Opinion
If I use up my super on a lavish holiday, can I still get the pension?
Noel Whittaker
Money columnistI’m wondering when my super runs out, would I be eligible for the pension? I was told Centrelink will go back five years and want to know how your super has been spent. If you have used it for an overseas holiday they may not give you any pension. Is this correct?
Centrelink has no problem with expenses such as home renovations, living expenses and holiday costs. The purpose of the five-year rule is to stop applicants for the pension disposing of large sums, for example, gifting large amounts of money to children (above normal limits) just to get the pension.
Any financial assets you have including your superannuation will be considered when you apply for the pension. There’s no special test on superannuation.
Taking an expensive overseas holiday using your super should have no bearing on your pension eligibility when the time comes.Credit: Getty Images
I read with interest your recent article about what cards to use when travelling. My husband and I, having recently retired, are now travelling through several different countries on our gap year. We have a Wise card and agree with all the points you make in your story, but I do question your remark about charges on Amex.
I use Amex for the perceived protection it provides me in case of a dispute. Perhaps I am an idealist? I have looked at the statements I receive and cannot see where a fee is charged. When booking accommodation through Booking.com, conversion from euros to Australian dollars is made before my chosen payment method is disclosed, so surely it would be the same for all credit cards?
You have raised a very important issue. I have used a range of credit cards overseas, and they all show the amount of the fee as a separate debit on the monthly statement. Most of the cards are 3.5 per cent, but I noticed Amex charge 4 per cent.
One of the great traps when travelling overseas is that many of the businesses you deal with overseas like to offer you the chance to pay your bill in Australian dollars. This is so they get the benefit of any profit on the conversion. Most hotel reception areas have a sign showing the conversion rates. If you check them out, you will find them extremely expensive.
Whenever I am overseas, I never accept an offer to pay in Australian dollars – I always use the currency of the country and normally get a much better rate and can see what any fees are on my credit card statement.
Having read your recent piece warning about buying a property in joint names with adult children and incurring capital gains complications, I am confused. If the property is bought as tenants in common, wouldn’t it automatically transfer to the child on the death of the parent? I didn’t pay capital gains on our home when my husband died. Our home just transferred to me.
A property held as tenants in common does not automatically transfer to the other holder – they are discrete shares and can be bequeathed in terms of the will. If the property is held as joint tenants, as would have been the case with you and your late husband, it would automatically have gone to the survivor.
But, irrespective of the name it is held in, if you own a property with your child, and it is transferred by you to that child it is a CGT event, and you’ll be liable for capital gains tax.
You regularly mention cashing out of super as a means of avoiding the “death tax”. Could the same result be achieved by an off-market transfer of shares? I realise that would incur stamp duty, but that is minimal, I think, compared with the cost of selling and buying back if you want to maintain the estate holdings.
A superannuation fund can pay a member benefit by way of an in specie transfer of an asset if this option is available. The fund will almost certainly have a lower rate of a capital gains tax than you would personally, and when you receive the asset its cost base for capital gains tax purposes will be the date of transfer.
Noel Whittaker is the author of Wills, Death & Taxes Made Simple and numerous other books on personal finance. Email: noel@noelwhittaker.com.au
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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