We travel frequently. What happens to our super if we both die in an accident?

My de facto partner and I are retired and each draw a pension from our separate super funds. Our wills are up-to-date, and we both have binding death benefit nominations directing our super to the surviving partner.

We travel frequently and wonder what would happen if we died at the same time. Would our superannuation death benefits automatically form part of our respective estates and be distributed under our wills, or do we need to make additional arrangements to ensure this happens? We have asked both our financial adviser and super fund but have been unable to get a clear answer.

This is a complex issue, and there have only been a couple of private rulings on it. Ideally, you should seek advice from your estate planning lawyer.

Superannuation expert Leigh Mansell of Heffron says the succession rules in your state may determine who is considered to have died first when the actual order is unclear – for example, after an accident. If those rules apply, one spouse will be treated as having died first. I refer to that person below as Spouse 1. For Spouse 1, first check whether their fund’s deed or binding death benefit nomination requires Spouse 2 to survive Spouse 1 for a specified period, or be alive when the death benefits are paid.

If neither requirement applies, Spouse 1’s death benefits may be paid to Spouse 2, with Spouse 2’s executor stepping into their shoes. Superannuation law permits this because Spouse 2 was an SIS dependant of Spouse 1 when Spouse 1 died. The tax outcome is different. Spouse 2 was also a tax dependant of Spouse 1 when Spouse 1 died. However, the concessional tax treatment applies only if Spouse 2 could reasonably be expected to benefit from Spouse 1’s death benefit. If Spouse 2 died before the benefit is paid, they cannot benefit from it. The tax concessions would therefore not apply, and the benefit would be taxed as though it had been paid to a non-tax dependant.

You wrote about a man with $900,000 in super who receives a part age pension and can earn $85,000 a year. How is that possible? I’m 71 in a relationship, have about $800,000 in super and a casual job earning about $10,000 annually. From using the Centrelink calculators, I assumed I would not qualify for even a part pension. Is there something I’m missing, and should I see a financial adviser about structuring my affairs differently?

This is a common misconception. When you apply for the age pension, you are tested under both the assets test and the income test. The one that gives you the lower pension is the one Centrelink uses. Because the two tests are way out of kilter, a person with substantial assets can also earn a substantial income without their pension being affected.

Your super would be given a deemed income of $1069 a fortnight, while wages of $10,000 a year would be about $385 a fortnight. The Work Bonus disregards the first $300 of your fortnightly employment income, which gives you a total assessable income of $1154 a fortnight. This would entitle you to a pension of $743.65 a fortnight under the income test, compared with $481.50 a fortnight under the assets test. Therefore, the assets test would apply. In fact, you could have total assessable income of around $2200 a fortnight and still receive the same pension because the assets test would continue to be the one that determines how much pension you receive.

I am 70, receive the full age pension and intend to sell my home in Brisbane and move to the bush for some peace and quiet. I have found several suitable properties within my price range, but many are on more than five acres. My understanding is that Centrelink may assess land above a certain area separately from the home. How can I buy a larger acreage property without reducing or losing my age pension?

Regan Welburn of My Pension Manager says Centrelink generally exempts your home and the surrounding five acres from the assets test. If you buy a larger property, the value of the land above five acres will normally be assessable. It would therefore be prudent to obtain valuations for the house and exempt five acres, and for the entire property. In many cases, most of the value will be in the house and surrounding land, so the additional acreage may not have a major effect.

For home owners, the current assets threshold for the full pension is $333,000 for singles and $499,000 for couples. Above these levels, the pension reduces by $3 a fortnight for every $1000 of additional assets. The pension cuts out at $745,750 for singles and $1,121,000 for couples. So a tree change may well be possible without losing your pension. If your pension is reduced, another option is Centrelink’s Home Equity Access Scheme, which allows eligible retirees to supplement their income by borrowing against their home. There are also special rules for people who have lived on larger properties for at least 20 years, which can in some circumstances exempt the entire property.

I’m turning 60 in March, my husband is 68 and currently receiving the age pension (almost the full amount). I have a super balance of $460,000, he has about $180,000 in a super pension account, and cash. I aim to retire at 60 and transfer my super to an account-based pension but leave some in accumulation phase to cover the cost of my life insurance.

Does the balance left in accumulation phase get counted as an assessable asset by Centrelink when working out my husband’s age pension? I am considering leaving about $150,000 in accumulation phase to reduce our assessable assets and maximise my husband’s pension. I understand I will have to pay 15 per cent tax on earnings on this amount.

Your super will not affect your husband’s pension until you reach age 67, unless you start an account-based pension from it, in which case it will become fully assessable immediately. I suggest you leave things as they are and make lump-sum withdrawals as necessary.

Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Email: noel@noelwhittaker.com.au.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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