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West Australian
04-05-2025
- Business
- West Australian
Nick Bruining Q+A: Centrelink's work bonus scheme allows you to work AND keep collecting a pension
Centrelink has indicated to my wife and I that we can each receive up to $11,800 from paid employment, which represents a combined total of $23,600. As it stands, I'm likely to exceed that amount, while my wife will not receive any employment income. If I exceed the $11,800 and as my wife does not earn any employment income, could I be paid up to $23,600 from employment without our pensions being reduced? The work bonus scheme is a program specifically targeted at aged pensioners. Under the scheme, a person can earn $300 gross a fortnight from employment income, before the additional employment income is added to their Centrelink-assessable income. That income is used for means-testing purposes. If the $300 work bonus is not used in any particular fortnight, it accumulates in a work bonus 'bank' up to a maximum of $11,800. People who apply and qualify for a pension receive an instant credit of $4000 to their working bonus account. This might allow them to assist in a 'handover' program with their employer at retirement. Any employment income would be applied against the bonus bank credit before it carries over to the normal income-free area of $212 a fortnight for singles and a combined $372 a fortnight for couples. For example, let's say as a member of a couple you had the maximum $11,800 in your individual working bonus bank account. You had a one-off contract for a few weeks and at the end, received a payment of $12,500. The $11,800 would be fully used up, the $372 income free amount in the fortnight the payment is received is also used, leaving you with $328 of Centrelink assessable income above the income free area. This amount will reduce your pension by 50¢ per $1 so your combined household pension will be reduced by $164 for the next fortnight. Centrelink will use your combined fortnightly income for the income test, no matter which member of the couple generates that income. Significantly however, the unused work bonus credits cannot be transferred. That means your wife's $11,800 bank credit cannot be used by you. I have a self-managed superannuation fund which was set up many years ago with myself as the director of the corporate trustee of my now pension fund. I intend to transfer all of my SMSF into a public offer, Australian Prudential Regulation Authority-regulated fund. Would corporate trustee arrangement prevent me from joining an APRA-regulated fund? The simple answer is no, there are no issues in rolling over your entire account balance into an APRA-regulated fund. All public offer superannuation schemes are APRA regulated. Your situation is common for those who have been operating an SMSF for some time. For reasons including total operating costs, complexity and the fact we just want to simplify things as we age, many SMSF users are keen to shut down the fund as they get older. The most effective and simple way would be to sell down the assets and convert all holdings to cash. Because the fund is in retirement phase, no tax is payable on the sale of the assets. You then need to select the receiving fund and prepare the rollover benefit statement, or RBS, which provides the receiving fund with specific tax and date based information. An electronic transfer of funds will need to be done by you as trustee, essentially via a superannuation clearing or messaging facility. It's important to leave an adequate amount of money in the SMSF to meet the wind-up expenses which should be similar to the annual expenses you are currently paying. By making this transition now, all of the transactions should be complete by June 30, meaning that year's accounts can incorporate the shut-down documentation and costs. Any amount left over can simply be paid out to you as a final withdrawal from the account. Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association


Bloomberg
20-02-2025
- Business
- Bloomberg
February Global Regulatory Brief: Risk, capital and financial stability
ESRB publishes report on a monitoring framework for systemic liquidity risks in financial system The European Systemic Risk Board (ESRB) has published a comprehensive report on liquidity risk that provides a detailed framework for monitoring systemic liquidity risks in the financial system, focusing on both funding liquidity and market liquidity. In more detail: The report emphasizes the importance of understanding and measuring risks to systemic liquidity by paying attention to financial system entities beyond banks and key asset classes beyond sovereign bonds. It outlines the following key components: Conceptual Considerations: The report defines systemic liquidity risk and its essential dimensions, including funding liquidity risk and market liquidity risk. It also discusses the interactions between these dimensions and the potential for contagion and amplification of liquidity stress. Monitoring Framework: The framework identifies key entities and markets that should be systematically monitored for emerging liquidity risks. It presents indicators for funding liquidity risk, market liquidity risk, and contagion and amplification risks. The framework includes composite indicators that capture the main dimensions of systemic liquidity risks. Country Applications: The report provides examples of how the framework can be applied to specific countries, such as the Netherlands and Finland. These applications highlight the importance of considering country-specific features and financial structures when assessing systemic liquidity risks. Case Studies: The report includes case studies that illustrate the application of the framework to real-world scenarios, such as the COVID-19 pandemic and the liquidity stress faced by GBP funds following liability-driven investment strategies in September 2022. Main lesson: The report underscores the need for a macroprudential approach to monitoring systemic liquidity, complementing ongoing micro-prudential initiatives to increase resilience at the level of individual entities, markets, and activities. It also highlights the importance of using a comprehensive set of indicators to capture the various dimensions of liquidity risk and the interactions between them. Significance: The monitoring framework can be applied in all EU jurisdictions and enriched by adding further dimensions in the future. It can also inform the design of early warning indicators for systemic liquidity risk and the development of systemic liquidity stress tests. APRA highlights the need for improved valuation and liquidity risk governance in superannuation The Australian Prudential Regulation Authority (APRA) has released findings from its review of superannuation trustees' valuation governance and liquidity risk management practices. Summary: Conducted in December 2023, the review covered 23 trustees managing 80% of APRA-regulated assets, totaling $2.7 trillion, with $500 billion in unlisted assets. While progress has been made since 2021, 12 trustees showed significant gaps in areas like board oversight, conflict management, revaluation processes, and liquidity planning. In More Detail: APRA expects trustees to address deficiencies promptly and align with Prudential Standard SPS 530 Investment Governance (SPS 530), warning of further regulatory action if necessary. Key findings include: SPS 530: A significant proportion of trustees still displayed material gaps in key areas, including the need for material improvements in either or both their valuation governance or liquidity risk management frameworks to meet the requirements of SPS 530. Unlisted asset valuation governance: There was particular weakness across board oversight and conflict of interest management, revaluation frequency and triggers, valuation control, and fair value reporting. Liquidity risk management: There was particular weakness in liquidity stress trigger frameworks, unlisted asset liquidity risks and liquidity action plans. What this means for trustees: APRA has said that these findings are 'concerning and highlight the need to further lift practices across the industry'. APRA will engage directly with those trustees identified as having deficiencies and will expect them to formulate appropriate and timely remediation plans. APRA expects all trustees to review the findings, assess themselves against SPS 530, and, if needed, enhance their valuation governance and liquidity risk frameworks. APRA has noted that where necessary, it will take further action to enforce SPS 530 and related requirements. FSB publish impact report on reforms to securitization markets The Financial Stability Board (FSB) has published the final report on the impact of the G20 Financial Regulatory Reforms on Securitization, particularly the IOSCO minimum retention recommendations and the Basel revisions to prudential requirements. In summary: The evaluation finds that these reforms, introduced in the aftermath of the 2008 global financial crisis, have contributed to the resilience of the securitization market without strong evidence of material negative side-effects on financing to the economy. Complex structures that contributed to the GFC – including securitizations of subprime assets, collateralized debt obligations and re-securitizations – have declined significantly, while the securitization market is more transparent. However, the market has not yet been tested through a full credit cycle to fully confirm the evidence on enhanced resilience, particularly in the case of collateralized loan obligations (CLOs) that have seen significant growth in recent years but have not yet experienced a prolonged downturn. Non-bank growth: The reforms appear to have contributed to a redistribution of risk from banks to the non-bank financial intermediation (NBFI) sector, with banks shifting towards higher-rated tranches. This redistribution of risk has been driven both by an increase in non-bank financing of the economy and by the growth of non-bank investors in securitizations. Key regulatory issues: The report highlights key issues for national authorities and international bodies to consider: The need to monitor risks in securitization markets in light of developments such as the growth of synthetic risk transfers and private credit in securitization structures; The effectiveness of risk retention requirements for risk alignment in CLOs, given the fact that a large part of the global CLO market does not currently operate under such requirements and given the use of third-party risk financing for CLO structures; and