February 15, 2012

Vol 1 Ed 3

Online at http://www.financialcareservices.com.au/newsletters/vol-1-ed-3

Financial Care Services

Newsletter Volume 1 Edition 3
Sent April 2011

Who is a ‘couple at Centrelink’?

A recent advertising campaign proclaimed that ‘A couple at home is a couple at Centrelink’.

Thus any two adults who share domestic arrangements and present socially as a couple could be treated as a couple for Centrelink purposes.  Couples who have documentary evidence of the relationship such as a marriage certificate or registration of a relationship, are usually happy to be ‘a couple at Centrelink’.  Those who had casually just ‘moved in together for the time being’ are more surprised at being considered ‘a couple at Centrelink’ effective from the date they moved in together.

Whilst they are living at home together, a member of a couple who had attained their Age Pension Age, could apply to Centrelink for the Couples’ rate of Age Pension and be subject to the ‘Couples’ means testing arrangements.  Centrelink base the Couples means testing on the total combined assets and income of the Couple.

Centrelink expects both members of the Couple, or their attorneys, to disclose their full asset and income position on the one form and provide the original supporting documentation.  The financial data is submitted jointly and is accessible to both members of the couple at Centrelink.  Hence the members of a ‘couple at Centrelink’ cannot keep their financial data ‘private’ or ‘confidential’ from their partner.

A couple who married in the 1950’s are likely to have their home and financial assets in joint names.  The other spouse is usually aware of any assets held in the name of only one member of the couple.  For example, individual bank accounts receiving superannuation payments or a bequest.  These long term married people are usually content to be a ‘couple at Centrelink’.

If one or both members of a couple enter residential aged care then they become a ‘couple separated by illness at Centrelink’.  Each member of a ‘couple separated by illness’ is eligible for the Single rate of Age Pension but reduced according to the asset and income tests for a Couple.

When two people become a ‘couple’ later in life they often intend to keep their financial affairs separate.  But as a ‘couple at Centrelink’, they are subject to the Couples means testing for the Couples rate of Age Pension and for residential aged care fees.  This appears simple and logical for a couple but the human element abounds.

Consider the case of a widower who owns his home and some term deposits; he receives a superannuation pension and a reduced Single rate Age Pension.  He is lonely and accepts the invitation to move in with a widow temporarily.  She also owns her home and receives the full Single rate Age Pension.  Their adult children live interstate and are not really aware of their parents’ situations.

Centrelink becomes aware of their new arrangements maybe from its data matching program.  Centrelink reviews their Age Pension entitlements to treat them as a couple with effect from the date that they started living together, such as the last time he stayed at his house.  His, now vacant, home is no longer an exempt asset.

As a result of the review, Centrelink reduces their Age Pension entitlements on account of their joint asset and income position, to about 70% of the Couple rate of Age Pension each, backed dated to when he moved in.  Their actual payments from Centrelink are further reduced as Centrelink recoup their overpayments for the initial period of living together.

He then sells his former home and places the proceeds in the bank to generate additional income.  Centrelink then reduce their Age Pensions to around 50% of the Couple rate on account of the additional deemed income.  They utilise their pensions and part of his investment income to cover their regular expenses.

Some time later she needs to enter residential aged care because of physically frailty but she still has a clear mind.  Her son comes to Melbourne to settle her into care and negotiates an Accommodation Bond based the estimated value of her home.

Her son then tries to update Centrelink and realises that Centrelink treat her as part of a couple and assess her for Age Pension and income tested fees based on the joint assets and income of the couple.  To complicate matters further, his mother intends that her partner continue to live rent free in her home.  The son is stressed; his mother has neither the cash savings nor sufficient income to cover her monthly bills.

The challenge for advisers is to know if the client is considered to be part of ‘a couple at Centrelink’ and to confirm the identity and financial position of the other person in the couple.  The private financial arrangements and ‘understandings’, of couples can be complicated.  The Centrelink rules make the situation more complex and open to misunderstandings within the wider family group.

About Us

Clients of Financial Care Services receive impartial confidential financial advice from an actuary.  Financial Care Services is an independent professional financial advisory service which holds Australian Financial Services Licence number 299570.

Clients are charged flat fees for advice and assistance; no upfront commissions are accepted in respect of clients’ investments.  Home visits and out of hours appointments are available to assist client families.

For more information call Christine on 9808 0338 or visit www.financialcareservices.com.au

Financial Care Services specialises in advising seniors through life’s transitions.

Remember, referring your clients for impartial professional financial advice enhances your profile and reduces the potential for later complaints.

Christine Hopper
Fellow of Institute of Actuaries of Australia
Director and Authorised Representative
Financial Care Services
Telephone 03 9808 0338