My super fund has collapsed. Can I get the pension in the meantime?

I’m caught up in the collapse of First Guardian super, and while this is going on, I won’t have access to my super. Am I entitled to receive the age pension in the meantime to help me get by? Or do I have to wait until the liquidator formally declares that everything is lost? If I do have to wait, do you have any advice on how I can support myself?

The minister for social services can grant a deeming exemption when someone’s superannuation investment is tied up due to a fund failure, including cases of fraud.

If your super fund fails, there are options available to you.Credit: Simon Letch

To qualify, three key conditions must be met: the deeming rules must not be undermined by granting the exemption; the investment must not be producing any return; and the investor must have no access to their investment capital. If a fund collapse affects many people, a general deeming exemption may be applied to all affected investors.

People affected by a failed investment may also apply for an asset hardship provision, which can give them a temporary exemption from the assets test.

Because the value of super can change as more information becomes available – for example, when the liquidator’s report is released – any exemptions granted are temporary and subject to regular review.

Anybody in this situation should contact Centrelink’s Older Australians line and ask to speak to a Financial Information Service Officer. They can explain how to apply for a deeming exemption and what documents you’ll need to support your case.

I’m 68 and still working. I’m trying to understand how offsetting a capital gain with a lump sum super contribution actually works.

I own an investment unit that was bought for $420,000 and is now worth about $985,000. If I sell, the capital gain would be about $550,000. After applying the 50 per cent CGT discount, the taxable gain would be $275,000. If I contribute that amount to super, would it be taxed at just 15 per cent instead of being added to my personal income and taxed at marginal rates?

CGT is assessed by adding the net gain – after adjustments and the 50 per cent discount – to your taxable income in the year the contract for sale is signed. Therefore, you should aim to have your income as low as possible in that year.

One way to do this is to defer the sale until a year when you’ll be in a lower tax bracket – for example, after retirement – or to reduce your taxable income by making a tax-deductible contribution to super.

The limit on tax-deductible contributions (concessional contributions) is $30,000 a year, which includes the employer contribution. However, if your superannuation balance was under $500,000 at June 30 in the previous financial year, you may be able to use catch-up contributions.

You need to take expert advice because there are potentially large sums of money involved. The maximum catch-up contributions would be $137,500 – but this would only apply if there have been no concessional contributions made in the past five years. In addition to the standard $30,000 cap for this financial year, the total concessional cap could be as high as $167,500.

We are a couple that now receive a part age pension with combined assets of about $800,000. If one of us passes away and the other inherits the full $800,000, it appears the surviving spouse may lose pension eligibility due to the higher single person’s asset test threshold.

Would it be possible to include in both our wills a clause to leave, say, $300,000 directly to our children (instead of the surviving spouse) so that the remaining spouse’s asset level drops to $500,000 and they remain eligible for a part pension? Or would Centrelink treat this $300,000 as a gift and still count it against the surviving spouse’s assets?

Centrelink does not treat assets left directly to your children via your will as a gift from the surviving spouse. In other words, if the deceased spouse’s will directs that $300,000 go straight to the children, and the remaining $500,000 goes to the surviving spouse, Centrelink will only assess the $500,000 received by the survivor.

This is very different from giving money away during your lifetime, which is assessed under Centrelink’s gifting rules which limits gifts to $10,000 a year with a $30,000 cap over five years.

So yes, it is absolutely legitimate to structure your wills so that part of your estate goes directly to your children to help keep the survivor’s assets below the pension thresholds.

Of course, this should be balanced carefully with the needs and wishes of the surviving spouse, and a solicitor should help draft the wills to make this work cleanly.

I started a 24 -month term deposit in January with interest accumulating until the deposit matures in January 2027. The company reported the interest earned to June 30 to the ATO for inclusion in my tax return, even though I won’t receive the interest until maturity. Is the un-received interest taxable as reported? I have never heard of this, and I’m just checking that it’s correct.

I’ve discussed this with my accountant and a couple of deposit takers, and they all assure me that incorporating the interest annually is the normal practice. I notice this is happening in my own term deposits.

Noel Whittaker is author of Retirement Made Simple and other books on personal finance. Questions to: [e-mail]

• 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.

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