Page 10 - FWP Wealth-Adviser-Issue-121 (FWP)

ISSUE 121
SEPTEMBER 2025
Ask a based on actual payments. This means Centrelink assumes
your pension balance generates income at set deeming rates,
Q&A: Question rather than focusing on how much you withdraw.
Deeming rates are set to a fixed percentage by the Federal
Government based on prevailing financial conditions
including things like interest rates and broader economic
conditions.
Question 1 If your pension started prior to 1 January 2015 and you
My friend told me that when she moved her super into were receiving an income support payment continuously
pension phase, she stopped paying tax on her investment since that date, you may retain “grandfathered” treatment,
earnings. How does that work? which allows for actual pension payments, less a deduct-
Superannuation has two main phases: accumulation and ible amount, to be assessed. But for most newer pensions,
pension. In the accumulation phase, which most people deeming applies, meaning the drawdowns you make don’t
are in while they’re still working, investment earnings are directly affect the assessment, it’s your balance that matters.
taxed at 15%. Once you reach retirement and transfer your A financial adviser can help you work out how your
super into an account-based pension, those earnings within pension is treated under these tests, compare potential in-
the retirement phase become tax-free. This can make a come outcomes, and plan drawdowns or asset structures to
significant difference to how long your money lasts, because optimise your Centrelink entitlements under current rules.
your balance is no longer being reduced by ongoing tax on
earnings. Question 3
There is, however, a limit to how much can be transferred If I plan to leave money to my grandchildren, would it be
into this tax-free phase. The transfer balance cap is currently better to do that through my super or my estate?
$2 million per person. Any amounts above this cap must re- Superannuation is not automatically part of your estate
main in accumulation, where earnings are still taxed at 15%. when you pass away. Instead, it is paid as a death benefit,
Structuring your super effectively between these phases can either directly to dependants or via your estate if directed
help maximise your retirement income and minimise tax. that way. Dependants for superannuation purposes include
Your financial adviser can help you manage this transition a spouse, children under 18, or anyone financially depen-
and ensure your super is working as efficiently as possible. dent on you. Grandchildren are generally not treated as
dependants unless they were financially reliant on you. This
Question 2 means that if you want to leave money to grandchildren, the
I heard that account-based pensions are treated differently super benefit usually needs to be paid to your estate first,
by Centrelink under the income and assets tests. How are and then distributed according to your will.
they assessed under current rules? There can also be tax implications. Death benefits paid
Account-based pensions are treated in specific ways to non-dependants, including adult children and grandchil-
under Centrelink’s means tests. For the assets test, the bal- dren, may be taxed, reducing the overall inheritance they
ance of your account-based pension is included as an asset receive. Careful planning can help reduce this impact and
and valued at its latest market or account value. For the in- ensure your wishes are carried out efficiently. A financial
come test, if your account-based pension commenced on or adviser can work alongside your solicitor or estate planner
after 1 January 2015, the payments you receive are generally to help you decide the best structure for leaving assets to
assessed under the deeming rules rather than being assessed your grandchildren.

Future Wealth Planners

Level 1, 176 Main Street
Osborne Park WA 6017

P.O. Box 16
Osborne Park WA 6917

P: 08 9207 3844
W: www.fwplanners.com.au
E: clientservices@fwplanners.com.au

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