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Ask Paul: An inheritance means I will lose the pension - and I'm fine with it

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Dear Paul,

I'm 70, single, and I get the full retirement pension as well as taking 6% per year off my now $200,000 superannuation balance. I own my own home and do not work full or part-time.

One of the loveliest things about being in this situation is that I do not have to worry about - or send in - an annual tax return!

ask paul clitheroe inheriting money pension tax returns

I do have one nice-to-have upcoming problem, though: I'm due to inherit a large sum of money and won't need to rely on the pension (which is fine by me - I don't see why taxpayers have to assist me when I have my own capabilities).

My worry, and it'll be a nice worry, is that I will have to start declaring my income if I invest this into a managed investment.

What would the one-time tax be if I put it all into my super instead?  

And what would the tax be if I then took a regular amount off it annually? I'm assuming none (as these would be post-tax contributions)?

And I'd not have to deal with tax agents or accountants going forwards (unless I want to)? Your clarification will be most appreciated. - Kris

I love your positive nature, Kris. It really bugs me when people tell me they will lose their pension because of an inheritance.

Like you, I think it is a wonderful problem when your assets and income exceed pension limits. But I also get your point about not having to worry about tax returns - that would be nice.

I think your sunny nature will be rewarded with the government's intended changes to the work test for those aged between 70 and 74. In the May 2021 Budget it announced that it would repeal this work test and have this in place by July 1, 2022.

So, while presently you can't pop money into super as a non-working 70-year-old, you should be able to quite soon.

And yes, I think it is a good idea. All my normal reservations apply, such as not exceeding the maximum you can put in. A low-cost super fund is a great place to earn good, diversified returns with zero hassle for you.

My own tax accountant is going to give me grief. She does a good job for us, but am I looking forward to a day when I don't need to lodge tax returns? Absolutely yes.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Comments
Yvonne Dickens
March 10, 2022 7.55am

What age do you have to stop working in Australia and if you are still working past 70 do you still have to pay tax

Yvonne

Kelsey M
March 10, 2022 9.01am

There's no age limit on working you can work as long as u can hold down a job You can't reitire if you cant afford it but u have to keep paying tax

Laurie Fletcher
March 14, 2022 11.20am

My husband is on long service leave and won't be going back to work afterwards. He is 68 and going to retire. I am 69 and still working as I can't get the pension because he's still officially working.

My question is "why can't I get the concession card"

I have been a tax payer all my life. I would like to retire too

Hazel Milenkovic
April 6, 2022 4.58pm

Hi Paul, I'm on the aged pension and was wondering if I went back to work on a casual basis and put all of my earnings into Super, would I still have to pay income tax and would it interfere with my pension. Thanks

Money magazine
Verified
April 6, 2022 8.25pm

Hi Hazel,

Thanks for your comment.

Unfortunately, Paul cannot respond to comments, but we will pass your question along to him for his consideration for a future issue of Money magazine.

- Money team