Question 1

I turned 60 at Christmas, I own my own home. I have a SMSF and with it I have purchased a two-bedroom unit in Brisbane ($550,000) which I virtually own outright ($10,000 owing). I want to retire from my stressful job as I do not enjoy my work as I used to. I want to get a less stressful part time job and use the money I receive in rent from the unit ($500per week) as a top up or sell the unit outright and invest the money from it, is this legally possible?

It’s common to want to move to a less stressful job once you hit your fifties and sixties. It’s also not uncommon for people to retire earlier than they would otherwise because of a dislike of their job.

You could move all or part of your (self-managed) super into an income stream. As you have reached 60 this could be under a ‘transition to retirement pension’ or, if you do change or jobs, or retire, all of your current super balance would become available, and you could start a regular income stream.

Once in an income stream you need to take at least 4 per cent of your account balance annually from your pension (this figure goes up as you age).

I’m not sure if you hold other assets within your SMSF, but 4 per cent of $550,000 is $22,000. Receiving $500 per week would meet this requirement ($26,000). However, once you turn 65, you then need to draw down 5 per cent of your balance, and I assume your SMSF unit would have increased in value at that time, but your rent may not be enough to satisfy these requirements.

So, I assume at some point you may need to sell the unit to fund your income payments but you can still leave the proceeds in super. This may make it may be easier to manage your super as you get older.

Either way though, yes, you can look to receive income from your SMSF.

I suggest seeking advice from a SMSF specialist to ensure you set up your pension in that correct manner.

Question 2

I am age 63 with $700k in super and my wife is 62 with $300k in super. We have a $300k mortgage on an $800k property. We plan to retire very soon and to start drawing down on our super and to pay off the mortgage immediately using the wife’s super. Is this the best option or should we use say $150k from each of our super balances? 

It might not make a big difference whose super fund is used to pay off the loan, however, there are a couple of things to consider.

Firstly, as you turn age pension age (67) first, you may want to keep your wife’s super in accumulation until she hits age pension and use your funds to pay off the loan.

This is because her super would not be counted against your age pension assessment until she hits age 67. And if you have used $300,000 of your super already, you may receive a larger age pension payment, at least for the first year or so (or whatever the age difference is between the two of you).

Secondly, although you are a couple, some people like to have their own funds. This is an entirely personal choice on how you and your wife like to manage your finances.

Question 3

We lost our part-pension when the Jan 2017 changes reduced the asset limit. We were given a Pension Concession Card and over time drawdown of our super has brought us back under the asset limits and we now receive a half pension. We will soon receive an inheritance that will put us over the asset limit again. When we draw this down under the asset limit will we be grandfathered and be assessed on the assets and not income?

Changes were made to the assets test at the start of 2017. The main change was that for every $1000 of assets over the allowable limit your age pension was reduced by $3 per fortnight instead of the more generous $1.50 per fortnight.

To compensate for this change the allowable asset test amount went up, and for those pensioners who lost the age pension (or other income support payments) they were automatically provided with:

• A health care card, and;
• Pensioners over age pension age were also issued with a Commonwealth Seniors Health Card.

Once you again become eligible for the age pension you would then also be eligible for the Pension Concession Card which would replace the above cards.

If losing access to the age pension again, you would then just revert to having to apply for the Commonwealth Seniors Health Care Card, which is only income tested, at very concessional levels.

If you again spend down funds to be eligible for the age pension you would then be provided with the Pensioner Concession Card.

Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.

This column also appears in our sister publication The New Daily, which is owned by Industry Super Holdings.