We’ve paid off the house. Where should we invest our money now?

I have a pension of $500 a fortnight, I own my own home, and I’m single. I have $450,000 in the bank. My furniture and vehicle would be worth $25,000. Can I receive all or part of the old-age pension?

Your money in the bank will be given a hypothetical income of $427 per fortnight, which, together with your pension, will give you an income for retirement purposes of $927 per fortnight. Under the means test you will be entitled to a fortnightly pension of $718.

If I include three non-dependent adult children in my binding death benefit nominees, will they pay tax on their share of my retirement benefit? There seems to be some confusion because under the super law the term “dependent” includes children of any age, whereas in the tax code it generally only covers children under 18. Which definition applies?

If I nominate my Legal Personal Representative instead, will this avoid tax because the money goes to my estate and is later distributed under my will? My understanding is that in this case, no tax or “death tax” will be applied when my adult children inherit. Is this true?

Mindy Ding from the Entireti Technical team points out that pension law defines who a super fund can pay death benefits directly to, while tax law regulates how benefits are taxed when received by the beneficiary.

Children of all ages are considered dependents under the super law; Therefore, nominating your adult children to receive their inheritance outright is an option. However, the tax code considers children under 18 and financial dependents as dependents who are eligible to receive the death benefit tax-free; therefore, your adult children will be subject to paying taxes on the retirement benefit to the extent the payment contains a taxable component.

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An alternative option is to direct your retirement benefits to your estate and make provisions in your will to distribute the benefits to your children. But that doesn’t mean your kids will avoid taxes altogether.

The tax imposed on the ultimate beneficiary is generally the same as if he had received the inheritance directly. However, the final tax rate may be lower depending on whether the property has other taxable income.

While tax is an important consideration when deciding whether to leave retirement benefits directly to the beneficiary or through inheritance, other factors should also be taken into account, such as asset protection in the event your adult child experiences a relationship breakdown or bankruptcy.

My wife and I have a pension fund through ESS Super. A savings fund is divided into an income stream and a lump sum. I would like to ask whether the lump sum we are unable to access is included in the Commonwealth Seniors Health Card calculations.

The Commonwealth Seniors Health Card is based solely on means testing, not means testing, so the size of your pension fund will not disqualify you. What matters is your adjusted taxable income and your assumed income from account-based retirement.

If part of your pension is included in an account-based income stream, the balance of that stream is counted as income and included in the test. Amounts currently in savings or lump sum components that have not been converted into income streams are not counted.

The current combined income limit for a couple is $161,768 per year. What is important is to verify whether the lump sum is still in savings or transferred to the income stream; only the latter affects the means test.

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