Can I factor an inheritance into my pension plan?

I am 60 years old and getting ready to retire. I plan to roll over to an Allocated Pension in early 2023. I own my own house and have nearly $900,000 in my super account. My question is in regard to a family inheritance I will be receiving once my father’s estate is tidied. I anticipate around $100,000 in cash and about $200,000 from the sale of a previous residence. I want to put both sums in my super fund while in the accumulation stage, hopefully this will happen in the second half of this year. If the above two matters do not get sorted in the second half of the year prior to going on to Allocated Pension, what options do I have? When I transfer my super into the Allocated Pension Fund can I leave a bit of money in the super account? That way, when the above happens I can put the money into super and transfer into the Allocated Pension later. Or, is there another way of doing this?

Once you have established an Allocated Pension you are unable to add to it. However, should you retire, establish the Allocated Pension and then the inheritance is received, all is not lost. You can contribute to superannuation up to the age of 75 (from July 1, 2022) without meeting a work test, so your plan is plausible at any stage. The non-concessional contribution cap is $110,000 per financial year, or up to $330,000 using the bringforward provisions. After adding the “new” money to super, you arrange to roll over the Allocated Pension into that fund, and then roll over the total amount into a new Allocated Pension. I would strongly recommend that you seek professional financial advice before proceeding to ensure strategy and structure are right.

I intend to go on extended paid leave from the end of this year which will take me past my super preservation age (59) next March. I then intend to retire and access enough of my super (about $750,000) through the lowrate cap to pay off debt (we owe about $100,000 on our mortgage). My wife who is a year younger will continue to work full-time for a further 18 months. I will then not require accessing my super until after I turn 60, which I know is tax-free then. If I access super, will the low-rate cap amount have to be included on my tax return as income?

What you have proposed is certainly possible and will allow you to be debt-free. The current tax-free threshold when accessing super if under age 60 is $215,000 and so drawing $100,000 to pay out your mortgage will result in no taxation liability. The lump sum will need to be put on your annual tax return as Medicare Levy is payable on the amount withdrawn. Even though it is on your tax return, there is no income tax liability.

Brenton is a director and an authorised representative of Goldsborough Financial Services Limited. His advice should be considered as an opinion. Readers should consider engaging their own personal financial adviser. Questions and answers may have been edited for length.