SMSF wind-ups a risk to Centrelink benefits
SMSF practitioners should consider their clients' eligibility for a Commonwealth Seniors Health Card prior to winding up an SMSF, a tax expert has warned, since the process could affect that eligibility.
SuperConcepts' executive manager for SMSF technical services, Mark Ellem, told the CPA National SMSF Conference that before initiating the wind-up process of an SMSF with a client, practitioners should check whether any of the fund members are Centrelink benefit recipients.
“If you wind up the fund, you will be commuting any pensions out of the fund – what effect is that going to have on the member’s Centrelink entitlements?” asked Mr Ellem.
“You might think if you’ve got a self-managed super fund, you have too many assets to be entitled to the age pension, but there’s not just the pension, there’s the Commonwealth Seniors Health Card.”
Mr Ellem said many clients do not realise the test for the Commonwealth Seniors Health Card is only an income test, not an asset test.
“Those that held the Commonwealth Seniors Health Card prior to 1 January 2015 and were receiving a pension prior to 1 January 2015, those pensions are grandfathered under the old income test,” he said.
“If you wind up the fund and roll the pension over to another fund, a retail fund for example, you’re going to turn that pension into a post-1 January 2015 pension,” said Mr Ellem.
“Therefore, it will come under the new income test, which may affect the client’s eligibility for the Commonwealth Seniors Health Card."
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.