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<\/p>\nPeople nearing retirement often want to know how much they can earn before it affects their pension, and now there is a bit of good news on the horizon for SMSF members who receive the Age Pension.<\/p>\n
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Statistics indicate fewer Australians pass the Age Pension income test than the asset test. According to the Centre of Excellence in Population Ageing Research (CEPAR), approximately two-thirds of Australians receiving part pensions have too much income to be eligible for the full pension.<\/p>\n
The other one-third of part-pensioners have too much assessable wealth (assets).<\/p>\n
However, from 1 July, the income-free areas applying for the 2024\u201325 financial year will be $212 for a single member and $372 for a couple. These have seen an increase from $204 and $360 respectively.<\/p>\n
Pensioners who continue working have an additional $300 a fortnight added to their income-free area before the pension starts to get clipped. In the case of couples, each pensioner can access the extra $300 but you can\u2019t share it with your partner.<\/p>\n
Michael Hallinan, consultant for SuperCENTRAL, said the income-free area is the amount of income which can be received in respect of each fortnight without adversely affecting entitlement to the age pension under the Income Means Test.<\/p>\n
\u201cAny amount in excess of the free-income area will reduce the Age Pension by 50 cents per fortnight for each $1 above the income-free area,\u201d he said.<\/p>\n
To illustrate how this will work for SMSF members, Hallinan gave an example of John, whose only income-earning asset is his SMSF pension balance of $400,000 as at 1 July 2024.<\/p>\n
\u201cThe SMSF pension is a financial asset so the deeming test will apply. Under the deeming test John will be assessed as receiving $298 per fortnight,\u201d Hallinan said.<\/p>\n
\u201cThe first $212 has no impact on his age pension. The balance above the income-free area is $86. His pension entitlement per fortnight will be reduced from $1,116.30 \u2013 maximum pension entitlement before reduction due to means tests – by $43.\u201d<\/p>\n
He added that whether John draws down $20,000 or $35,000 from his pension is irrelevant as entitlement to the age pension is based on the deemed income from the pension account and not the pension payment amount.<\/p>\n
\u201cThe $400,000 pension balance will be treated as producing $156.50 on the first $62,600 at 0.25 per cent and $7,591.50 on the balance being $337,400 at 2.25 per cent,\u201d Hallinan said.<\/p>\n
\u201cThis total of $7748.00 is converted to a fortnightly rate which is $298 ($7748\/26). The first $212 of the $298 is within the income-free area and so does not affect John\u2019s age pension entitlement. However, the balance \u2013 being $86 \u2013 will reduce his age pension entitlement by $43 given the reduction rate of 50 cents in the dollar.\u201d<\/p>\n
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Keeli Cambourne
\nJune 24 2024
\nsmsfadviser.com<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"
People nearing retirement often want to know how much they can earn before it affects their pension, and now there is a bit of good news on the horizon for SMSF members who receive the Age Pension.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1899"}],"collection":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/comments?post=1899"}],"version-history":[{"count":1,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1899\/revisions"}],"predecessor-version":[{"id":1900,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1899\/revisions\/1900"}],"wp:attachment":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/media?parent=1899"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/categories?post=1899"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/tags?post=1899"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}