Q & As of the month

Find out what your peers are asking – based on real-life questions submitted to TechConnect.

By Claudine Siou, Senior Technical Services Manager

Q: My clients are a couple who are moving into a retirement village. They are in good health and are choosing to live in a retirement village for personal reasons.

If they pay an entry contribution of $396,000, will they be homeowners or non-homeowners? Also, are they eligible for Rent Assistance for the maintenance fees that they are required to pay?

A: For couples who are not illness separated and who move into a retirement village together, Centrelink divide the entry contribution between the members of the couple and the Extra Allowable Amount (EAA) is also divided between them. In this scenario, the total entry contribution of $396,000 is divided by two and assessed as an individual entry contribution of $198,000 each. The EAA is the difference between the pension homeowners’ and pension non-homeowners’ asset value limits. The EAA is currently $214,500 which is also divided between them, so the EAA for each person is $107,250.

To determine the clients’ homeownership status and whether they may be eligible for Rent Assistance, the entry contribution is compared to the EAA.

If the entry contribution is…Then the person is a…And rent assistance is…
less than or equal to the EAA non-homeowner payable
more than the EAA homeowner not payable

For each person, the entry contribution of $198,000 exceeds the extra allowable amount of $107,250. This means both members of the couple are considered to be homeowners and are not eligible for Rent Assistance.

Please note, Centrelink assess illness separated couples differently to couples who are not.

A couple are illness separated if:

  • they are unable to live together in their home as a result of the illness or infirmity of either, or both of them, and
  • because of that inability to live together, their living expenses are, or are likely to be, greater than they would otherwise be, and
  • their inability to live together is likely to continue indefinitely.

The couple are living together and do not satisfy the definition of an illness separated couple.

By Mark Gleeson, Senior Technical Services Manager

Q: I have a client who wants to take advantage of a catch-up concessional contributions strategy and make concessional contributions of $75,000 into their super and claim a deduction.

My client is under age 67 and their super balance is below $500,000, however, my understanding is that for them to be able to contribute $75,000 they must not have made any concessional contributions in the current financial year as well as the previous two financial years, namely the 2019/20 and 2018/19 financial years.

What form needs to be completed to claim a deduction on this personal contribution of $75,000 and is there a special form they need to complete to access previous years’ unused concessional contribution cap amounts?

A: To make a personal deductible contribution in 2020/21 of $75,000, we need to ensure there are no other concessional contributions across 2018/19, 2019/20 and 2020/21 financial years. The most common concessional contributions include super guarantee, salary sacrifice and personal deductible contributions.

A notice of intent must be lodged with the super fund, not the Australian Taxation Office (ATO), generally before the earlier of (1) when the tax return is lodged or (2) 30 June of the next financial year. The super fund must provide an acknowledgement of receiving the notice of intent to the client who can then claim the deduction. The ATO will already have records of previous years’ concessional contributions and no special form needs to be completed to use the catch-up concessional contributions measure.

It’s also necessary to ensure that the total super balance is below $500,000 at 30 June 2020. Super balances have fallen in recent times, but it is the balance at 30 June of the prior financial year which is relevant for the catch-up concessional contributions measure.

More information

If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.

Disclaimer
The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.