Ask Peter Scott

In the Ask Peter Scott section of the December 2015 issues: Time to Enjoy and Time to Invest. There was a question and answer about divorce and superannuation. The answer was largely copied from a Trish Power article that is exclusively licenced to SuperGuide.com.au

First Super apologises for the unauthorised re-production and not acknowledging the source of the material.

If you’d like to read the original article please click here.

Question 1

I was retrenched from my job in June 2015 at the age of 52, and I have been on the Newstart Allowance since 1 August 2015, I am unable to pay for all of my current household bills and I was hoping that I could access some of my superannuation account to pay my outstanding bills.

Answer

As you have been on the Newstart Allowance continuously for over 26 weeks, you may be eligible to access some of your superannuation under the ‘Severe Financial Hardship’ provisions.

If eligible, you may be able to claim between $1,000 and $10,000 in any 12 month period to meet your immediate expenses, however, this payment is subject to the standard superannuation lump sum tax provisions.

The tax rate for a person aged 52 is 22% of the ‘Taxed Element’ that forms part of your payment (this includes the 2% Medicare levy).

Your claim will be assessed by the Trustee and they will determine any amount that is to be paid.

The following documents would need to be provided, together with the completed application form to support your claim:

• Centrelink letter Q230 dated within 21 days of the application (Confirms that you have been on Newstart and currently remain on that benefit)
• Certified proof of identity
• Documentary evidence of unpaid/outstanding bills
• Completed Statutory declaration segment of the application form

If you wish to proceed with an application, you should contact First Super to obtain the appropriate forms.

 

Question 2

Can I transfer part of my superannuation account to my wife?

Answer

The superannuation system does not permit balance transfers between spouses, however, you are able to transfer part or all of the Concessional Contributions (Employer, Salary Sacrifice and Member Deductible Contributions) receive in the last financial year under the provisions governing ‘Contribution Splitting’.

If approved, you can split up to 85% of your concessional contributions made in the financial year

When can you apply to split your concessional contributions?

You can apply to split your contributions at any age, but your spouse must be either:

• Less than the preservation age* that applies to them; or
• Aged between their preservation age and 65 years, and not retired.

If your Spouse meets this criteria, you can:

• Obtain a copy of the Contribution Splitting Application Form from the Australian Taxation Office (ATO) website.
• Complete the application form and return it to First Super (not the ATO) relating to contributions made in:
  • The financial year immediately after the financial year in which the contributions were made; or
  • The financial year the contributions were made, only if you’re entire benefit is being withdrawn before the end of that financial year as a rollover, transfer, lump sum benefit or combination of these.
• First Super will assess your application to see if it meets the eligibility criteria to split your concessional contributions
• If the application is approved, First Super will transfer the contributions into your Wife’s account.

Date of birth	*Preservation age
Before 1 July 1960	55
1 July 1960 – 30 June 1961	56
1 July 1961 – 30 June 1962	57
1 July 1962 – 30 June 1963	58
1 July 1963 – 30 June 1964	59
From 1 July 1964	60

 

Question 3

I am 56, currently work part-time and will earn approximately $28,500 this financial year, could you please explain the system where I make a contribution to my superannuation account, and then the Government also makes a contribution into my account?

Answer

The process you have described is called the ‘Government Co-Contribution Scheme’.

How the scheme works:

• You make a personal after-tax contribution to your superannuation account
• You lodge an income tax return for the financial year
• First Super advise the Australian Taxation Office (ATO) of all contributions it received during the financial year
• The ATO make an assessment under the Co-Contribution System, and if they determine you are eligible, the ATO will credit the ‘Government Co-Contribution’ amount directly into your account.

The matching rate of the co-contribution is 50% to a maximum of $500. Therefore, based on your current income if you were to contribute $1,000 to your superannuation account the Government Co-Contribution would be $500.

The First Super website has a Co-Contribution calculator you can utilise to estimate the Co-Contribution amount.