FINANCE

What happens to my pension if I win lotto?

Hank Jongen

HI everyone, Margaret has written to me asking what would happen to her Age Pension if she won lotto.

She asked about two different types of winnings: a lump sum, and a ‘set for life’ arrangement where you get a regular payment every month for an extended period of time (say 20 years).

It’s good to separate the two, because the impact on your pension eligibility is different depending on the type of winnings.

Let’s start with winning a one-off lump sum payment.

For Services Australia purposes, if you receive a lump sum through winnings or gambling, it is not treated as income. However, it may still affect your rate of pension, depending on what you do with it.

For example, if your winnings mean you now have more than a million dollars in the bank, then your new bank balance combined with your other assets would almost certainly push you over the asset limit and your pension would cease.

If you won $15,000, the increase to your total assets would be smaller and it may not affect your pension rate at all.

What you do with the winnings also has a bearing on how they could affect your pension. For example, if the $15,000 was used to clear a credit card debt or pay down the mortgage on your principal home, then it would cease to be an assessable asset the moment it was put on your card or mortgage.

If the funds stay in your bank account, or you move them to another investment, then it would be added to your existing financial assets and deemed. If you buy a new car, the car will be assessed as an asset.

The other type of winnings, known as ‘set for life’, is where you get a regular amount for a set period of time (like $20,000 a month for 20 years).

Services Australia treats these types of periodic payments as income. The income amount is assessed each time it is paid for the duration of the winnings.

It’s important to remember that if you do receive winnings, either as a lump sum or periodic payments, you need to let Services Australia know.

You can tell us about your changes online, using your Centrelink account through myGov or on your Express Plus Centrelink app. You can also call us on 132 300 and talk to a Financial Information Service officer.

Thanks for the question Margaret and good luck to you!

See you next month.

Hank.

Proposed super changes for 2022 present opportunities

Damian Gibson, Partner, Elevate Wealth*

AS part of the 2021–22 Federal Budget, the Government announced some promising changes to superannuation rules.

The Government has introduced the ‘Treasury Laws Amendment (Enhancing Superannuation for Australians and Helping Australian Businesses Invest) Bill 2021’, which sets out the proposed changes.

One of the main intentions of the Bill is to make it easier for older Australians to contribute to their superannuation.

From the view of a financial adviser, the proposed changes are welcomed and present a raft of superannuation opportunities for individuals.

Here we will discuss a few of the proposed changes.

Removal of the work test

If you are aged 67 and want to make voluntary member contributions to your super, you must currently meet the work test criteria (or work test exemption).

The work test requires you to be gainfully employed for a minimum of 40 hours over a consecutive 30-day period during a financial year.

The Bill seeks to abolish the work test for individuals aged between 67 and 74 for nonconcessional contributions and salary sacrifice contributions from 1 July 2022.

If approved, this will also extend to government cocontributions and receiving spousal contributions.

Unfortunately, at this stage the Bill does not intend to remove the work test for personal contributions which you can claim a tax deduction (Personal Deductible Contributions).

Extending the bring forward rule to under age 75

Currently, a member of a super fund under the age of 67 can ‘bring forward’ two years of non-concessional contributions and make a total contribution of $330,000 into their super fund (subject to their total super balance).

The Bill is seeking to extend this age so the bring forward rule can be used for members who are 74 or younger at the start of the financial year from 1 July 2022.

For those members turning 75 in the financial year, they have until the 28th day of the month after their birthday to employ the bring forward rule.

Reducing the downsizer contribution age

up to $300,000.

To make a downsizer super contribution you must satisfy several conditions, one of which requires you to be aged 65 or over at the time of making the contribution.

The Bill seeks to lower the downsizer contribution age from 65 to 60 from 1 July 2022.

It is important to note that all other existing conditions still need to be satisfied prior to making a downsizer contribution.

Getting more into super

Assuming the bring forward rule age is extended and the downsizer rule age is reduced, individuals will have significant opportunities to make large lump sum contributions into their super funds.

An individual aged between 60 and 74 would have the ability to contribute up to $630,000 to their super, and a couple would have the ability to contribute $1,260,000.

This assumes legislation is passed and all other conditions are satisfied.

Superannuation legislation is forever changing and can be hard to keep up with.

As always there is devil in the detail and conditions that will still need to be met if the changes become law.

If you think these proposed changes may benefit your situation, talk to a financial adviser today and get on the front foot. *Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.