I’m looking for advice on the benefits of purchasing private health coverage to avoid paying the Medicare levy surcharge. I’m single and earning $110,000 per annum I understand that it would be better to pay for private health insurance to avoid paying the Medicare Levy surcharge, which begins when income reaches $93,000.

However, I am intending to put $15,000 into the First Home Superannuation Saver scheme. Would this mean that my taxable income will go to $95,000, and I wouldn’t receive the same tax benefits as I would otherwise without the $15,000 deposit?

Salary sacrificing to buy a home will reduce your taxable income, but not when it comes to the Medicare levy.Credit: Simon Letch

It’s not that simple. While your taxable income will reduce to $95,000 (after the $15,000 salary sacrifice), your income for the Medicare Levy Surcharge (MLS) is still $110,000. This is because the definition of income for MLS is taxable income plus ‘Reportable Employer Super Contributions’, which includes salary sacrifice contributions.

Consequently, you will be subject to the MLS, which at $110,000 of income will be 1 per cent. You would still benefit from an income tax reduction via the salary sacrifice, but will still be liable for the MLS unless you take out private health insurance.

I will turn 60 in September this year. I have heard about the benefits of a Transition to Retirement Pension (TTR) and I’m considering putting this in place with my superannuation. I have also heard that a TTR is not as beneficial as it used to be. I will go to four days a week and hope to use TTR to offset the one day loss in wages. Would you recommend this as a tax effective strategy?

I would not call it a tax effective strategy because your fund will still be paying 15 per cent income tax, even though at the age of 60 you’ll be drawing a tax-free income.

The main benefit of a TTR is that you can gain access to your superannuation without leaving your job. The purpose of the scheme when it was introduced was to encourage people to stay in the workforce longer.

My elderly mother is an aged pension recipient. She recently sold her home and moved in to aged care. If she now wishes to gift $100,000 to her adult children – I understand Centrelink will continue to recognise this as her asset for five years, so her pension will not increase, but it will not decrease. This is correct?

This is generally correct, for Centrelink purposes, the $100,000 gift (less the first $10,000 that can be gifted in a financial year), it will continue to be regarded as an asset until five years from the date of the gift.