How will our joint-owned investment properties affect our pension?

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I am 66 and receiving a life pension from a state-based super fund. My wife is 74 and her sole income is from a home unit she owns that is rented to our son for $250 a week. We live on a hobby farm of 40 hectares and also have a holiday home. When assessing my wife’s eligibility for an aged pension, are our two other properties assessed at the full value or half the value as they are in joint names? Is the valuation on our rates notice suitable for the calculation?

When a couple applies for the age pension, all their assets and income are combined when testing for eligibility. The only exemption is superannuation in accumulation mode owned by a person who has not yet reached pensionable age. The market value of the properties will be the number used – the rate notice is not relevant.

When a couple applies for the age pension, all their assets – such as multiple properties – are assessed.Credit: Simon Letch

If we retire at 60 with enough cash in the bank to last a year or two, and leave our super in the accumulation stage (meaning we technically have no income), will we pay capital gains tax when we sell our two investment properties? What would be the rate of CGT? The properties are in joint names.

You will most likely be liable for capital gains tax and you should be discussing this with your accountant sooner rather than later. CGT is assessed by adding the gain after the 50 per cent discount to your taxable income in the year the sales contract is signed. It’s probably going to be best to wait until you have finished work and your income is lower. You could sell the properties over two financial years to minimise the impact.

My wife and I have funds in separate superannuation funds in accumulation mode and each of us has nominated the other person as the 100 per cent beneficiary in the event of death. If I pass away first, what happens to the funds in my super account? Do they get transferred to her super account, or does she get the money in cash, or does it just sit in my super account until she withdraws it?

Once the member of a superannuation fund dies, the balance must be withdrawn. In your case, the money will be paid to the appointed beneficiary. When you die, it will need to be paid out as a death benefit to her. In the normal course of events this could be either a pension to her or a lump sum directly to her – your balance wouldn’t be added to her super account, it will stay separate. Your fund will pay those benefits to her. She could choose to roll the death benefit pension to her own fund but, even then, it would be in a separate account to her own super.

You should review your death benefit nomination – does it say it’s to be paid to her as a lump sum or a pension, or does it leave it open to her and the trustee to decide? That will impact her options. If she has a pension in place herself, she might not be able to take all your super as a pension.

I understand that if you withdraw money from your super, and then recontribute it as a non-concessional contribution, you are reducing the taxable component. The effect is less tax payable by non-dependent beneficiaries when you die. Is it true you have to open a new super accumulation account to accept these funds?

That is correct – a super fund in pension mode cannot accept contributions. But there is no problem having two accounts. It’s very common.

Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Email: [email protected]

• 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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