Ask Noel
Sydney Morning Herald
Wednesday March 17, 2010
I'm a 45-year-old single mother of three children. I have an income of about $53,000 a year. I'm also salary sacrificing at the moment but this has a negative effect as Centrelink adds about $17,000 to my yearly income. It pushes me up to about $63,000, which decreases any family payment. Should I keep salary sacrificing? I also have a HECS debt of $5500, which is deducted with each pay.The salary sacrifice strategy you are using is not adversely affecting Centrelink payments because they will be based on $63,000 a year whether you salary sacrifice or not. The main benefit of salary sacrifice is that such payments lose just 15 per cent tax whereas money taken in hand costs you 31.5 per cent in tax. Continue on your present course because this will boost your final super payout.On retirement it seems I can withdraw my super in a lump sum, spend it all and then fall back on the full aged pension. What incentives are there for being a self-funded retiree? I imagine the more adventurous person would spend it on holidays. The more conservative would spend it on improving their standard of living in areas that don't impact the aged pension. The more charitable could also gift it away if it's done five years before receiving a pension.I've heard rumours there are people who blow their retirement lump sum and go on the full pension but I have yet to meet one. It's a sad reality most Australians have vastly inadequate super and often need it to pay off their debts when they retire. It is also true those who are fortunate enough to have built substantial super are wary about spending it. There are many advantages in being a self-funded retiree and these include the ability to jump medical queues, freedom from red tape and financial independence.In a recent article you mentioned funeral bonds as a way of maximising pensions but when I sent away for information they all tried to sell me funeral plans. They are not bonds, are they? Where can I find out/buy funeral bonds? Are such bonds still useful for us even though my husband and I are respectively 66 and 71 and drawing an allocated pension from our self-managed super fund and receive few Centrelink concessions?A funeral plan is effectively prepaying your funeral in advance, whereas a funeral bond is an investment that could be cashed in by your executors to help pay your funeral expenses when you die. Most people enjoy the feeling of having their funeral paid for and they will enable you to qualify for a slightly larger aged pension. A good financial adviser will be able to help you choose.Noel Whittaker is a director of Whittaker Macnaught. His advice is general in nature and readers should seek their own professional advice. Contact noel.whittaker@whittakermacnaught.com.au.Questions to Ask Noel, Money, GPO Box 2571, QLD, 4000, or see moneymanager.smh.com.au/sitewide/askanexpert.My husband recently passed away at 44. Before he died, he was insured for total and permanent disability with an insurance company. The other TPD came with his super. He put in two claims, one of which he received just before he passed away and the other just after. I'm wondering if I need to pay tax on behalf of my husband for the funds I have received or is it me that has to pay tax as his beneficiary?The proceeds of life insurance policies and TPD policies held outside super are not taxable. In some cases, there can be tax on a super payout if part of that payout came from proceeds from an insurance policy within the fund but if the payment is made to the spouse, irrespective of whether there is insurance or not, the spouse will receive it tax free. It will only have tax implications if it's paid to a non-tax dependant.
© 2010 Sydney Morning Herald
Share This