Will inheritance affect pension?

Owen has a number of questions relating to a recent inheritance.


Q. Owen
I am 67 and my wife is 64. I am on a part pension of around $350 a fortnight. I am assessed for the pension based on a combined income of around $40,000. I have an income stream of $14,400p.a., based on $150,000 in super (which as far as I know is assessed as income as well as deemed income from the asset) and I also have $3000 in super. I have accumulated about $6500 in work bonus credits.

I recently received an inheritance of $30,000. We have a small farm and conduct some cattle trading which operates consistently at a loss (we meet Centrelink’s requirements for property over five hectares). I have shares, which Centrelink assesses as $10,000. My wife has about $150,000 in savings accounts and $250,000 in super.

My wife has been on income protection (now expired) and is now taking long service leave which ends in November, at which time she will be retiring from work altogether. She is currently earning about $450 a week. She is currently applying for disability, which is still being processed.

My questions are:

  1. Will the $30,000 inheritance affect my pension?
  2. Will the deemed income from the $30,000 be covered by my work bonus?
  3. Would it be better to deposit the $30,000 into my wife’s super?
  4. Would I be better off transferring the $150,000, generating the income stream, from my superannuation to her super as well?
  5. Can my wife withdraw amounts from her super as she will not have any income after November, or does she have to wait until she is 65 to do so?

A. The inheritance itself will not affect your pension, but what you do with that money will have an impact. If you place it in the bank, it will be treated as an asset and also have deeming applied to be considered as income. If you purchase an asset it will also be included in the assets test. If, however, you spend it on home repairs (assuming that you own your own home) or on a holiday, then it will not affect your pension.

The inheritance is not covered by the work bonus. The work bonus only covers income from paid active employment.

If your wife is yet to reach retirement age, any money in her superannuation account will not be included in the Age Pension means tests.

Transferring assets out of your superannuation fund to your wife is a legitimate strategy to reduce the impact of the pension means test, but there is a non-concessional contribution cap of $100,000 per year.

If your wife has reached preservation age she can begin a transition to retirement strategy that will enable her to convert a portion of her superannuation balance into regular income payments. If she does this, however, her superannuation balance will be included in your pension means tests, which means you may receive less pension in the process.

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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice. from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Written by Ben


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