19th Nov 2014
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Deeming rules confusion
Deeming rules confusion

John believes that many of the rules surrounding the impending changes to deeming rules are detrimental to self funded retirees. Is he correct?

Q. John

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. 





    COMMENTS

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    Johnosnr
    25th Nov 2014
    1:11pm
    Have a look at this web page:
    http://www.humanservices.gov.au/corporate/publications-and-resources/budget/1415/measures/older-australians/57-11207
    Cheezil61
    26th Nov 2014
    7:39am
    WoW... I'm not looking forward to "getting old" let alone relying on pension or my super when the time comes... it is all SO confusing & constantly changing, how is anyone supposed to keep up with it all! Ignorance maybe (I'm 53 & work full time so don't understand much at all about this sort of thing) but what is "grandfathering" ?
    *Imagine*
    26th Nov 2014
    10:02pm
    Cheezil61 Grandfathering simply means that if you are under a particular rule before the introduction of a new one, then the new one will not affect you. Sometimes a grandfather clause has a limited time span, this is to allow people to make alternative arrangements. Also the rule maker may, in the future decide that the ‘Grandfther Rule” will no longer apply. In superannuation law, past performance, suggests that this is a certainty.

    Keeping up with it all is very difficult and I often see errors from “expert” opinions. Also incorrect descriptions such as this from DHS
    “This means that from 1 January 2015, superannuation account based income streams will be deemed under the existing deeming rules for the Age Pension.”
    DHS know what they mean by this, and expect everybody else to as well. In effect it is NOT the account based income stream that will be deemed, it is the Superannuation balance from which the income stream is derived. That is the whole of your super e.g. $300,000, not the income stream, that may be only $15000 per year.
    What deeming means is that the DHS assumes that you are making a given percentage (presently about 3%) on the whole $300,000 balance and that ($9000) is counted as income. You might be lucky enough to be making 12% or it might be minus 10%, it doesn’t matter, you are deemed to be making what they determine.

    Hope this helps, although I imagine that by the time you reach retirement age none of this will be relevant.


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