Planning for Centrelink & Re-Contribution Strategy

A Yield Client Case Study

Age Pension

Eligible for payments for 5 years.

Superannuation

Est. $82,000 benefit to their estate.

Retirement

Sufficient funds for retirement due to advice implemented.

Overview

The following is a case study of clients we helped transition into retirement by providing clarity around how their financial position could look in retirement, along with analysing options on how they could structure their assets for their retirement. Ultimately, this lead to eligibility to the Centrelink Age Pension and a reduction in estate taxes to any non dependent beneficiaries.

There were many moving parts in the advice document we prepared, including them selling their home in Metro/South Eastern Melbourne suburbs, so they could relocate more permanently to their beach house, but also buying a small one-bedroom apartment to use as a city pad for weekend visits.

The plan addressed meeting their income needs in retirement and assessing any Centrelink eligibility they might have, while considering the needs of their estate.

Outcome

Some of the strategies we implemented for this client included:

• Centrelink Age Pension – Due to an age discrepancy of five years between these clients (he is 65 and she is 60), we were able to re-organise their assets such that he became eligible for the Centrelink Age Pension for five years, versus not being eligible at all before our advice. There were other considerations at play as well, however undergoing the re-organisation was elected as it provided a risk free way of achieving a slightly better outcome, due to the fact that receiving the pension takes out some of the market risk under the alternative scenario’s assessed.
• Re-Contribution Strategy – A way of essentially moving super component balances around to make the estate value of their superannuation tax-free to non-dependents. In this instance, we were able to use the non-concessional contribution limits to achieve an outcome for the estate, where the result would be $22,000 of tax payable, compared to an estimated $104,000 if the strategy was not employed. This is a benefit to the estate of $82,000 without taking any more or less risk. 
• Retirement Position – Our analysis helped our clients understand how their position could look in retirement and whether their funds would be sufficient to allow them to continue to live the lifestyle they would like. Our conclusion was that they could have sufficient funds to see out their days, which provided them the peace of mind to take the steps of what can be a very uncertain transition in peoples lives.

The re-contribution strategy is one that we believe many financial planners may miss in the right circumstances, as they are either unaware of it, it takes too much effort or it doesn’t make them money. Our philosophy is to always do the most we can for our clients and to work closely with their other advisers on the advice we provide.

Produced With Our Clients Permission

If you are at or nearing retirement and would like to discuss your retirement needs, please contact us for a no-obligation review of your position.

Important Note

The content of this case study has been based on a real-life client. Any information provided here is general advice only and does not consider your objectives, financial situation or needs. This information should not be taken as comprehensive and does not constitute legal or financial advice. You should seek legal, financial or other professional advice before relying on any content. Yield Financial Planning is not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published.