Join our investing community

Salary Sacrifice and Aged Pension Income Test

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Shady, 22nd Mar, 2009.

  1. Shady

    Shady Well-Known Member

    Joined:
    13th Feb, 2009
    Posts:
    52
    Location:
    Sydney NSW
    I've been looking around for some rules and regulations on the income test for the aged pension.

    Situation
    Couple aged 57(her) 60(him)
    She is on a wage ~$150k pa
    He is retired

    He is not eligible for the aged pension because of her income.
    Can she salary sacrifice down to an amount so he is eligible for the aged pension?


    My understanding was that the rules changed back in 2007 so now any amounts that are salary sacrificed are now included in the income test for the aged pension.
    From memory other benefits are only assessed on the taxable income but the aged pension and disability allowance are two that do not use taxable income as the income test as stated here.

    So anyone know if you can salary sacrifice to get under the income test for the aged pension? and where I might be able to it on a govt web site?
     
  2. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Shady,

    Men are only eligible for the Age Pension once turning age 65. I wouldn't bother with worrying about "qualifying" income or assets test until he reaches that age.

    Cheers,

    Dan
     
  3. Andrew Newman

    Andrew Newman Well-Known Member

    Joined:
    5th Nov, 2008
    Posts:
    175
    Location:
    Melbourne
    Hi Shady

    Dan is spot on about age 65 being the qualifying age for men. For women it depends on their date of birth.

    Check the Centrelink website here for more details: Eligibility rules for Age Pension

    Kind Regards
     
  4. Shady

    Shady Well-Known Member

    Joined:
    13th Feb, 2009
    Posts:
    52
    Location:
    Sydney NSW
    LOL....right you are. I should have put a bit more thought into it. So lets changed his age to 65. What the outcome now?

    Can you salary sacrifice into super to qualify for benefits under the incomes test? Either newstart, aged pension, disability allowance....

    From the link I put in my first post, only Family Tax Benefit is based on taxable income...so what is the other benefits based on?


    Cheers
     
  5. Andrew Newman

    Andrew Newman Well-Known Member

    Joined:
    5th Nov, 2008
    Posts:
    175
    Location:
    Melbourne
    Change his age - how do you do that - who is the he?

    You also mention Newstart, Aged pension and Disability allowance.

    It would help if you were more specific with your question?

    Cheers
     
  6. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    lol...
    This is getting very interesting changing someone's age at a drop of the hat...
     
  7. Shady

    Shady Well-Known Member

    Joined:
    13th Feb, 2009
    Posts:
    52
    Location:
    Sydney NSW
    Nothing wrong with changing your age is there? :rolleyes::rolleyes:

    It's a hypothetical question guys. I heard somewhere around the traps that you cannot salary sacrifice your income to a point where you are able to claim government benefits.
    From the course I did today, the facilitator said that it was part of the budget and will take affect from 1st July 2009. He also mentioned that any negative gearing will be ignored in the same income tests for government benefits.

    I'm just trying to find confirmation of this one way or the other?

    cheers
     
  8. Shady

    Shady Well-Known Member

    Joined:
    13th Feb, 2009
    Posts:
    52
    Location:
    Sydney NSW
    A Ha! I found it. Its not specific, but at least I wasn't dreaming.
    This is from the 2008/2009 budget overview, excuse my lack of knowledge of politics but does the budget need to be 'passed' through both houses of government or something? or is this as good as done? Just like they did with the alco-pop tax.


    http://www.budget.gov.au/2008-09/content/overview/html/overview_26.htm
    and again here
    Reforms to Income Tests - 2008-09 Budget Measures
     
    Last edited by a moderator: 24th Mar, 2009
  9. Shady

    Shady Well-Known Member

    Joined:
    13th Feb, 2009
    Posts:
    52
    Location:
    Sydney NSW
    Now I dont know what to think.

    As usual the Gov. websites are very vague about it all but I found this on the AMP website.


    This is very specific about what benefits use the new wider income test.
    It covers Newstart under the "Income support payments for people below Age Pension age" but where, if at all does aged pension fit into the mix? "Financial and retirement savings assistance delivered through the tax system." buts its not delivered through the tax system is it? I thought this would relate to the SATO et el.
     
  10. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Shady,

    ATO and Centre Link are separate. Eg, a retiree (over age 60) may be receiving an Income Stream from an Allocated Pension benefit of $80,000 per year which is tax free for tax purposes. The same $80,000 per year will wipe out any Age Pension you may receive from Centre Link, even though it isn't taxed.

    Cheers,

    Dan
     
  11. Shady

    Shady Well-Known Member

    Joined:
    13th Feb, 2009
    Posts:
    52
    Location:
    Sydney NSW
    Gday Dan,

    Yep, I know they're different, but it seems for "Financial and retirement savings assistance delivered through the tax system" and some centrelink benefits they will now (post 1/7) both use the same new expanded income test.

    Do you see where I'm coming from and what I'm after?
    Currently there a quite a few people who salary sacrifice large amounts of their income to superannuation in order to qualify for (or their spouse qualify for) some kind of government benefit. Whether it be their partner qualifying for the aged pension/newstart/disability assistance or them qualifying for SATO/LITO/FTB A or whatever.
    It seems as of 1st July 2009 these people will no longer qualify for these benefits as any amounts salary sacrificed will be added back onto their income for assesment purposes. Obviously this has nothing to do with the tax payable on the income, just the eligibility for some government benefits.

    If they are not made aware of it and make appropriate changes to their situation (if any exist) then they will get a nasty surprise come July 1.
    I'm still not clear on whether this new expanded income test will be law come July 1 or whether it needs to be approved by some government department or whether it applies to the aged pension at all.
     
  12. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Shady,

    I see where you are coming from but not quite sure what your after...

    It's up to Centre Link to advise their existing recipients that there are changes to the income testing (eg, now to include salary sacrificing, etc).

    You'll find that this is already law and comes into play from 1st July 2009. This was one of Mr Rudd's first policy changes, it happened around the same time he decided that families have to earn over $150k pa to need private health insurance from the previous $100k pa. Who know why as this moves previously privately covered families into the public health system which as some media have uncovered can't even pay the bills of running a hospital...

    If your not scared now, just don't get sick...

    Cheers,

    Dan
     
  13. Shady

    Shady Well-Known Member

    Joined:
    13th Feb, 2009
    Posts:
    52
    Location:
    Sydney NSW
    ...Just confirmation of salary sacrificing implications with the income test for government benefits, which you have confirmed. Do you know if the expanded income test is used for all government benefits or just some?


    Ahhh, so its law already.

    Thanks again Dan
     
  14. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Shady,

    Probably just Centre Link but don't take this as gospel!

    Yes it is law already :)

    PS Watch out for Budget 09, I'm sure it's going to be a doozey!

    Cheers,

    Dan
     
  15. Shady

    Shady Well-Known Member

    Joined:
    13th Feb, 2009
    Posts:
    52
    Location:
    Sydney NSW
    Nah, the website has no information other then what I posted in my original post. I guess I'll just have to keep looking.
    Its a bit rough when even the lecturers don't even know:eek: maybe I should have gone to Kaplan instead of RG146:D

    I bet you they'll just changed everything I've learnt in the last few weeks:(
     
  16. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Shady,

    I'm sure Centre Link don't know. One client was very upset with Centre Link as they told him one thing and then he got a newsletter saying the complete opposite...He was less than impressed...

    Cheers,

    Dan
     
  17. Shady

    Shady Well-Known Member

    Joined:
    13th Feb, 2009
    Posts:
    52
    Location:
    Sydney NSW
    I know how he feels, I rocked up there a few weeks ago and asked the girl at the desk about income test and salary sacrificing......she said, "What's salary sacrificing?". I just walked out:(
     
  18. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Shady,

    Ouch...I wouldn't have bothered either. When you get that response it's not worth your time asking any more questions. Saying that I have rung their phone centre who were more knowledgable (probably as they deal with it on a daily basis).

    Cheers,

    Dan