Does my retired mother need to file a tax return?

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Some years ago, Mum was advised by an accountant that she no longer needed to submit a tax return – she is retired, with a full age pension and $10,000 in the bank. She now has $300,000 in super after selling the family home and moving into a care facility. She receives almost the full pension. The RAD is paid and she pays a monthly fee. We are receiving conflicting advice about whether she needs to submit a tax return. Your thoughts?

The withdrawals from super are not taxable and the age pension on its own won’t be enough to create a tax liability, so there is no need to lodge a tax return.

Once you retire and are receiving the pension, generally you no longer need to file a tax return.Credit: Dominic Lorrimer

I have recently retired and I’m considering moving most of my super into a pension account. I prefer not to put all of it in at once as I don’t need all the income at this point. My understanding is that I am only allowed to make one deposit into a pension account. Then, when I later want to deposit the remainder of my accumulation funds, I have to open another pension account to do so. I was told that I could then also potentially join the first pension account with the second one. Is this correct? Also, if I downsize my house, am I able to contribute the $300,000 on top of the $1.9 million limit in pension mode?

You cannot make contributions into an account in pension mode. To create the pension account you are allowed to use the Transfer Balance Cap (TBC), which is limited to $1.9 million if you have not transferred any money to pension mode before.

Once the $1.9 million TBC is reached, no further transfers to the pension account are allowed. This is complex and you will need to take expert advice. To make further transfers to pension mode your best option may be to open a separate pension account and use the balance of the TBC there if necessary. If you tried to amalgamate the two pension accounts, there could be issues with the make-up of the taxable and non-taxable components.

Your best strategy may be to make a once-only transfer to pension mode – the benefits of this would be that your money would be in a tax-free fund, but the drawback would be that you would have to draw a minimum pension each year. This should be a minor issue unless you have a large amount of income outside super. The downsizing contribution can be made into a super accumulation account irrespective of your age or superannuation fund balance.

My husband has retired and is turning 67 on June 3, 2024. He has been claiming super as a deduction for the past few years in his tax returns. When does the work test requirement for claiming super as a deduction kick in? Some super literature suggests it is his 67th birthday. If that’s the case, does it mean he cannot claim any super deduction in his 2023-2024 income tax return, or can the deduction be pro rata? I would greatly appreciate it if you can clarify this.

He can claim a tax deduction for contributions made up to his 67th birthday, which is only three weeks before June 30, so he’s got plenty of time to do it. The work test will apply for claiming a tax deduction for contributions made after turning age 67. Just keep in mind contributions are limited to $27,500 a year, including employer contributions unless he has catch-up contributions available.

My husband had shares in CBA given to him many years ago. They are in his name only. If he were to pass away before me, are shares treated differently to cash in the bank? We have prepared our wills. We would appreciate your comments.

Assets such as shares and property are treated quite differently from cash as they are subject to capital gains tax (CGT). The good news is that death does not trigger CGT, so no liability is incurred until the beneficiary disposes of the asset, at which time they take over the base cost of the deceased.

If any of the shares are pre-September 20, 1985, when CGT came in, the beneficiary who will acquire them does so at market value at the date of death of the deceased. As the shares are in your husband’s name, if he were to pass away, the shares will form part of his estate and will be dealt with by his will.

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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