John believes that many of the rules surrounding the impending changes to deeming rules are detrimental to self funded retirees. Is he correct?
There is great confusion about the deeming provisions set to come in to effect on 1 January 2015. There are several issues which are not clear. Could you please address the following?
Is it correct that retirees who are fully self-funded will not have their superannuation arrangements ‘grandfathered’? If this is so, what is the rationale for this?
Will the amount deemed to be earned be considered by Centrelink as taxable income when determining eligibility for the Commonwealth Seniors Health Card (CSHC)?
What is the ultimate objective of this deeming? Is it to reduce the pensions of those with a part-Age Pension?
Will having a reversionary pensioner mean one has to avoid starting a new pension if one of a couple dies? If so how does one introduce this concept? Is it through one’s will or does it require a change to the superannuation trust deed?
A. There are many issues surrounding the new rules effective from 1 January 2015. I will try to address them in a general matter as clarification on your individual position should be sought before making any financial decisions.
Fully self-funded retirees will not have their superannuation arrangements grandfathered as they are not in receipt of an Age Pension on 1 January 2015 and therefore do not qualify for grandfathering. This is the same for those who are only eligible to apply for an Age Pension after 1 January 2015.
Eligibility for the CSHC is based on adjusted taxable income and legislation has just been passed to include tax-free superannuation income in the assessment of income when calculating eligibility for a CSHC. Therefore any income deemed to be earned will be included in any eligibility assessment. You can find out more about what constitutes adjustable taxable income by visiting HumanServices.gov.au.
The legislation to change the deeming rules was introduced by the then Labor Government under the superannuation reforms of April 2013 and was one of the bills adopted by the Coalition Government after its election. You can find out more by visiting Strongersuper.treasury.gov.au.
In regards to revisionary pensioner arrangements, you may find the article, New rules for reversionary pensioners, useful.
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