Opinion
We are considering giving our daughter, a single mother with two children, a $200,000 advance on her inheritance to help her buy her first home. We intend to document the advance properly and also protect it against any claim by a future partner.
I am 69 and my wife is 63, we are both retired and live in Western Australia. We have $1.2 million in superannuation, $320,000 in a term deposit and $137,000 in a Mojo account. We own our $1 million home, two cars and have no debt.
I understand that Centrelink would treat the $200,000 advance as a gift. How long would the excess gift continue to count for Centrelink purposes? On our present assets, and assuming expenditure of about $75,000 a year and investment returns of 8 per cent, I estimate it could be around 10 years before we qualify for a meaningful part age pension. Does that seem reasonable? Finally, would making the gift have any effect on our eligibility for the Commonwealth Seniors Health Card?
Provided the payment to your daughter is an unconditional gift and not a loan, it will cease to exist for Centrelink purposes in five years. If you go to the Retirement Drawdown Calculator on my website, you will discover that a capital sum of $1,657,000 will last for your lifetime, if you draw $75,000 a year, indexed at 3 per cent, and the fund earns 8 per cent. If you increase the drawings to $100,000 a year, it would still be $1 million after 30 years. Remember, suppose those assets fell to $1 million, you would still be receiving a pension of just $363 a fortnight. At that level, the main benefit is from the pension concession card, but you can still get many benefits with the Commonwealth Seniors Health Card (CSHC).
I understand that Centrelink would treat the $200,000 advance as a gift. How long would the excess gift continue to count for Centrelink purposes?
The CSHC has no assets test. For a couple, the combined income limit is $168,076 a year. Eligibility is based on adjusted taxable income plus deemed income from relevant account-based superannuation pensions. Superannuation held in accumulation phase is not deemed, although interest earned on bank deposits is assessable income. In your case, you are 69 and may qualify for the card now, but your wife, at 63, will have to wait until she reaches age pension age of 67.
With the changes coming to family trusts after the budget, if a trust holds investments in managed funds and the distributions or dividends are automatically reinvested, will the trust still have to pay the new minimum 30 per cent tax?
From July 1, 2028, family trusts caught by the proposed changes will be subject to a minimum 30 per cent tax on their taxable income. It makes no difference whether managed fund distributions or dividends are paid in cash or automatically reinvested. They remain taxable income, along with any associated franking credits.
Individual beneficiaries will receive a non-refundable tax offset reflecting their share of the tax paid by the trustee. However, under the current proposals, corporate beneficiaries will not receive this offset. If the trust’s franking credits exceed its minimum tax liability, the excess can be refunded to the trustee, but not to individual beneficiaries.
The proposals also provide options to restructure investments outside the trust or elect to identify specific beneficiaries to avoid the minimum tax applying at the trustee level. Given the potential consequences, trustees should seek professional advice once the legislation is finalised to determine the best approach for their circumstances.
After reading your article about the five numbers you need to know when choosing aged care, I was very interested in where you say that if she keeps her home, she will pay zero – no clinical care contribution. My wife is 86 and I am 89, and we are self-funded retirees. I still live in our family home. My wife has been at Warrigal in Goulburn since June 11, 2025. On entry, I paid $500,000 for her to move into a shared room. I then pay a daily fee of $66.80, a means-tested amount of $41.42, additional services of $29.45 and a hotelling fee of $29, which according to you should be capped at $22. There are no premium services. I rang aged care, and they know nothing about the statement that if you keep your home you pay nothing towards the non-clinical care contribution. Which one of these fees that I pay is actually the clinical care contribution, and why are they called different things depending on who you talk to? I would really appreciate it if you could help me understand whether I am, in fact, paying too much.
Because your wife moved into aged care before November 1, 2025, she is grandfathered under the old fee arrangements. The article I wrote was for people considering a move into aged care and dealt with the fees that apply today. When it comes to your situation, none of the value of your home would be counted towards your wife’s aged care costs because you are what is called a “protected person”, which exempts the home from her means test. If you were to move out of the home, half of the value of the home would be assessed against your wife, up to the capped value of about $215,000. The article wasn’t saying that if you keep your home you won’t pay a non-clinical care contribution. It was pointing out that the value of the home is capped at about $215,000, whereas if the home is sold to pay a RAD (refundable accommodation deposit), the full value is assessed.
I am 67 and understand that my adult children may have to pay tax on part of my superannuation when I die. Do I need to withdraw all the money from my super and re-contribute it to reduce or eliminate the tax my children may eventually have to pay?
There is a death tax of 15 per cent on the taxable component of superannuation death benefits paid to non-dependants, such as adult children, with an additional 2 per cent Medicare levy generally applying if the benefits are paid directly from the fund rather than through the estate. There may also be a tax-free component, depending on whether after-tax contributions have been made. One way around this is to give your attorney instructions to withdraw your entire superannuation balance tax-free if your death is imminent and place the proceeds in your bank account. The difficulty, of course, is that nobody knows when their final day will come, and some industry funds are notoriously slow in processing withdrawals.
There may come a time later in life when superannuation, which is essentially a tax-saving structure, is no longer appropriate for your circumstances. If you have more money than you need, you could withdraw some or all of it tax-free and give it to your children while you are alive, rather than leaving it to them in your will. This obviously depends on your individual circumstances, but I’ve long believed it’s better to give with a warm hand, so you can enjoy the pleasure it brings the recipients. The other strategy, which you mention, is to withdraw money from your super fund and re-contribute it as a tax-free non-concessional contribution. This effectively converts part of the taxable component into a tax-free component, reducing the potential death benefits tax payable by your children. However, contribution limits and eligibility rules apply, so it’s important to get advice before proceeding.
Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Email: noel@noelwhittaker.com.au.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.