Ask Paul: We're pensioners and just inherited $440k

By

Published on

Dear Paul,

We are 68-year-old pensioners receiving about $1200 a fortnight following an inheritance. We have no other income.

We have $220,000 in super. We own our own home and have no other debt.

Ask Paul Clitheroe We're on the pension and just inherited $440k

The inheritance was $440,000. Currently, it's invested at 4.50% at-call. If we combine our pension and income from the invested money, would we need to lodge a tax return in the future?  

Our other option is to put $360,000 into super. - Phil

Let's start with the easy bit, Phil: whether you need to lodge a tax return.

What I would suggest is you pop onto the Australian Taxation Office's website and use its online tool, 'Do I need to lodge a tax return?'

The next bit is not as simple. In general terms, I am a big fan of super. So, on the face of it, putting extra money into super sounds like a good idea.

Super, though, is simply a tax vehicle. Money that goes in can be invested as you choose, but as your presumably large super fund will tell you, earnings on your investments are generally taxed at 15%.

Here you need to consider whether earnings in both your names, if you split the inheritance equally, would be taxed at a lower rate if invested in your own names than if paid by your super fund.

Here we are moving into the complex field of financial planning for retirees and I am concerned that my general thoughts could lead you down the wrong path.

You would benefit greatly from some professional advice.

Without a good understanding of your entire situation, your spending requirements, your future plans and your attitude to risk, a good decision can't be made. If you don't have or know a good adviser, I'd suggest you start with your super fund.

It is likely to offer member advice or be able to refer you to an adviser.

This inheritance will make a huge difference to your future, and to benefit fully you need to get advice from an expert.

Get stories like this in our newsletters.

Related Stories

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
Money magazine
Verified
November 13, 2024 2.49pm

*EDITOR'S NOTE*

Paul Clitheroe is unable to respond to questions posted here in the comments.

Click here to ask your question: https://www.moneymag.com.au/co...

Ertimus Waffle
November 13, 2024 8.32pm

Waste of time

SANJEEV PAL
November 14, 2024 6.24am

Hi Paul

Another option would be to once contributed to super, to move it to pension fund. Super earnings in pension fund are not taxed.

Although, my bigger worry would be that the inheritance may have a slight impact on the Government pension amount based on the assets test. Probably best to also consider advice from the Services Australia pension advisers.

Just my 2 cents worth.

Phil Bert
November 14, 2024 8.24am

Just to clarify Paul's comments.

You can put $360k in tax free if your Super is in accumulation mode and you do pay 15% tax on earnings. But once converted to pension mode there is no tax on earnings.

Seeings as you have stated that you are Pensioners one would assume you are already retired and your fund is in retirement mode, you may need to open a new Super account to put the funds in and then convert to Pension and combine to minimise fees. I would speak to your industry super fund about it.