Finance guru, money columnist, and National Seniors Australia member, Noel Whittaker answers your tricky retirement questions about retirement finances and arrangements.

I understand there is a death tax of 17 per cent on the taxable component of your superannuation if left to a non-dependant. Apparently, children who are financially dependent on a deceased parent pay no tax on receipt of the taxable component of the parent’s superannuation benefit. We have been told that otherwise independent children can qualify as financial dependants simply by being in receipt of regular payments from their parents and arranging suitably worded declarations. 

This is simply not true. Financial dependence occurs when a person is wholly or substantially maintained financially by another person. The ATO’s test is simple. 

Simply providing a financially independent child with a regular payment, however well documented, does not make them a financial dependent. 

If the financial support received by a person were withdrawn, would the person be able to survive on a day-to-day basis? 

If the financial support merely supplements the person’s income and represents “quality of life” payments, then it would not be considered substantial support. 

What needs to be determined is if the person would be able to meet their daily needs and necessities without additional financial support. Simply providing a financially independent child with a regular payment, however well-documented, does not make them a financial dependent. 

The best way to avoid this tax is to have your Power-of-Attorney withdraw all your superannuation tax-free if your death becomes imminent.

Due to concern about the future of money and stocks, a few of my friends are moving their superannuation out of aggressive or balanced funds. What are your thoughts? 

It is natural for investors, particularly retirees, to get nervous when the markets are as volatile as they are right now. Further, the word recession is being bandied around which increases nervousness. The good news is that historically markets go down before a recession, then bounce back after the recession. 

Given that nobody can time the market successfully, I believe you are better off leaving your superannuation untouched unless it is in some particularly aggressive area while making sure you have got adequate cash available for the next two or three years’ expenditure.

I am approaching 61 and my wife is 58. In 2020, we utilised a financial planner to assist with our finances and preparations for potential retirement. As part of this process, we withdrew my super and 95 per cent of my wife’s super and established a self-managed super fund. My wife is still working full time and I have just gained full-time employment shortly after retiring. We are still keen to build our super balance before retiring, and our financial planner has recommended I move my super account in the SMSF into the pension phase so that I can avoid tax. Then I withdraw the minimum amount each year and recontribute it back into our SMSF. My question is twofold: is this strategy legal, and will my money in the pension phase continue to grow as it had done in the accumulation phase? 

The advice is fine. Once your superannuation enters pension mode, the returns should be higher than if it was in accumulation mode because it is not paying the 15 per cent income tax that applies in accumulation mode. You cannot contribute to a pension fund, but you can pay contributions to your own accumulation fund, and your SMSF administrator will allocate them to the right accounts. By withdrawing money, tax-free, and re-contributing it, you are progressively reducing the taxable component which is liable for the death tax. 

We are a couple in our 70s with $245,000 in super. We are downsizing and have just sold our current home and are purchasing an apartment. On completion of the sale and purchase, we expect a net profit of approximately $563,000. We plan to give our daughter $100,000 and put the rest into our super accounts. Excluding our Centrelink age pension, our current income is approximately $23,000 per year made up of our super pensions of $12,000 and United Kingdom pensions of $11,400. Will we be eligible for a part Age Pension under downsizing rules? 

If you intend to give your daughter $100,000, the best way to do it might be to give $10,000, before June 30 next year and $10,000 on 1 July, the following month. The balance of $80,000 will be counted by Centrelink as a deprived asset for five years. Under the downsizing rules, the amount you contributed to superannuation from the house sale will be counted by Centrelink as an asset under the assets test. Based on the information provided, you may be eligible for a part Age Pension.