Financial Care Services Newsletter

by Christine Hopper
Volume 14 Edition 1 – 30 January 2024

Christine at Financial Care Services, the specialist adviser to seniors in transition to new lifestyles

Are you a ‘homeowner’ at Centrelink?

Age Pension Asset Test Advantages for homeowners

The main advantage of being classified as a homeowner, is that your ‘principal residence’ is effectively counted at a nominal amount in the Centrelink means tests.
The Age Pension Asset Test effectively values your ‘principal residence’ at $242,000.

On the other hand, non-homeowners could claim Rent Assistance for renting a place to live or site fees for parking their manufactured or transportable home.

Consider Beth who is planning to retire after a long career as a live-in hostel manager.

Beth hopes to buy a home and claim a full Age Pension.
On retirement, Beth has assessable assets of $900,000 including her car, her superannuation entitlements, some savings and an inheritance from her parents.

At Centrelink, Beth is a single non-homeowner with assets of $900,000 on retirement.
In December 2023, Beth’s claim for an Age Pension was rejected because of the Asset Test.
A single non-homeowner can have assets of $543,750 before the Asset Test hits.
The Asset Test then reduces the Age Pension by three dollars per fortnight for every additional one thousand dollars of assets.
Assets of $877,585 is enough to exclude a single person from any Age Pension now.

Beth decides to buy a property as her permanent ‘principal residence’.
Beth spends $700,000 to establish her new home.
Beth now claims an Age Pension as a single ‘homeowner’ with other assets of $200,000.
The Asset Test Allowance for a single ‘homeowner’ is $301,750.
At January 2024, Beth’s assets are below the Asset Test Allowance for a single ‘homeowner’.
Hence Beth’s Age Pension payments would not be impacted by the Asset Test.

Remember, Centrelink check your situation against both the Asset Test and the Income Test.
If the Asset Test does not exclude Beth from any Age Pension then Centrelink would assess her under the income Test.

Then Centrelink would apply whichever of the Asset Test and the Income Test that would generate the smallest Age Pension payment.

But the deemed income from Beth’s remaining $150,000 of financial assets would be counted for the Age Pension Income Test.
In January 2024, the deeming rates of 0.25% on the first tranche and 2.25% on any additional financial assets do not generate enough assessable income for Beth to be hit by the Income Test.
Beth could now collect a full rate Age Pension as a single ‘homeowner’.

Long after retiring as homeowner Age Pensioners, the family home might need costly renovations but the superannuation and savings accounts have been spent.

Not every couple live happily ever after in the family home as an Age Pensioner couple living together in a home they own.
Consider Mike and Mary, an Age Pensioner couple who live together in a home that they bought before the birth of their first child.
All of their children are now independent adults, and the family home and garden are far too big for Mike and Mary’s needs.
The family home would need significant bathroom and kitchen renovation plus access ramps to allow for Mary’s mobility aids.
But Mike and Mary do not have any assets apart from their home and a not so new motor vehicle.
Their current home has an estimated value of $800,000.

As a ‘homeowner’ couple living together Mike and Mary are allowed $451,000 of other assets before the Asset Test could trim their Age Pension payments.
The Asset Test is not currently a problem to Mike and Mary.

Mike and Mary have only $10,000 in their bank account.
Their deemed income is far below the Income Test Allowance of $360 per fortnight for a couple.
Hence the Income Test does not impact them currently.

As a ‘homeowner’ couple living together Mike and Mary collect the full partnered rate of Age Pension payments.

Mike and Mary are considering moving into a retirement village or buying a manufactured home within a lifestyle community.

When the retirees purchase the ‘right to occupy’ an independent living unit in a retirement village as their new home

An ingoing payment of $400,000 would be required for the right to occupy an independent living unit in Mike and Mary’s preferred retirement village.
Then a regular service fee of $120 per week would be required for their share of the ongoing costs of their retirement village.

Mike and Mary together with their adult children consulted Christine at Financial Care Services for help in understanding the costs and benefits of living in their preferred retirement village.

Their children are now aware that when Mike and Mary leave the retirement village, their share of the capital costs of establishing and renewing the village roads, gardens and community centre would be deducted from any refund of their ingoing amount.

At Centrelink Mike and Mary would still be ‘homeowners’ as their ingoing payment was more than the $242,000 difference in Asset Test Allowances.

As a ‘homeowner’ couple living together Mike and Mary are allowed $451,000 of other assets before the Asset Test could trim their Age Pension payments.
As homeowners with about $400,000 of assessable assets, Mike and Mary would not expect to be impacted by the Asset Test.

But the deemed income from the financial asset released by their change of home could be sufficient for their Age Pensions to be reduced by the Income Test.

Their children are concerned that the reduced Age Pension would not be enough to cover the ongoing service fee for the retirement village and allow their parents a decent standard of living.

As part of their consideration of moving to the retirement village Christine at Financial Care Services showed the family that Mike and Mary would expect to drawdown on their financial assets to finance their ongoing living costs in the retirement village.

Every six months Mike and Mary would update the bank balance section of their Centrelink Asset record.
Centrelink could then recalculate the Income Test reduction to their Age Pensions.

By moving into the retirement village Mike and Mary would be buying a supportive lifestyle not a property investment.

When the retirees lease a site in a lifestyle community and purchase a manufactured home to park on their leased site.

Mike and Mary were also considering buying a manufactured home for $200,000 and then paying site fees of $220 per week.
At Centrelink Mike and Mary would be a non-homeowner Age Pensioner couple as their home purchase price did not exceed $242,000.
As non-homeowners, Mike and Mary could claim Rent Assistance to help with the service fee costs for the lifestyle community.

With about $600,000 of financial assets and about $220,000 of personal assets, their Age Pensions could be impacted by the Asset or Income Tests.
Remember, Centrelink utilise whichever of the Asset Test and Income Test generates the lower Pension payment rate.

At the January 2024 deeming rates, the deemed financial income on the $600,000 of financial asset released by their change of home could reduce their combined Age Pensions by about $40 per fortnight.

In January 2024, Mike and Mary would have $820,000 of assessable assets.
Remember, their manufactured home counts an assessable asset just like a caravan, boat or motor vehicle.
Thus, their total assessable assets exceed the $693,500 Asset Test Allowance for a non-homeowner couple.
The Asset Test could reduce their combined Age Pensions by $380 per fortnight in January 2024.

Mike and Mary could expect to have the Asset Test reduction applied to their Age Pensions after moving to that lifestyle community.
But if the deeming rates were increased significantly then the Income Test could be applied if it would hit them harder than the Asset Test.

When the time comes to move out of the lifestyle community, the family would need to have the manufactured home removed from the leased site.
Alternatively, they could sell the manufactured home to a retiree who was willing to lease that site from the lifestyle community owner.

Alas the promise ‘to grow old along with me’ does not ensure that every couple live together happily ever after.

Centrelink challenges await the partner who moves on before collecting their share of the jointly owned assets.

When you still part own the house after your relationship ends

Consider Kim and Sam who were sharing a home that they owned jointly.
At Centrelink, Kim and Sam were an Age Pensioner couple living together.

When their relationship disintegrated, Sam moved interstate to start a new life.
Sam submitted the Centrelink form “Mod S – Separation Details” to notify Centrelink that the relationship was terminated on the date that they moved out of the shared home.
Sam and Kim then became single Age Pensioner homeowners.

Once Centrelink were convinced that their estrangement was permanent, Sam was reclassified as a single non-homeowner.
Going forward Sam’s half share of their jointly owned home would be counted as an assessable asset for the Asset Test.
Sam’s Age Pension payment rate was reduced by the Asset Test as their total assessable assets exceeds the Asset Test Allowance of $543,750 for a single non-homeowner Age Pensioner.
But as a non-homeowner, Sam could claim Rent Assistance for their leased accommodation.

Sam feels disempowered.
Christine at Financial Care Services is able to provide Sam with ‘personal financial factual information’ to
illustrate how Centrelink could treat their situation but she is not a lawyer.
Sam consults a lawyer experienced in relationship breakdowns to unscramble their jointly owned assets.

If joint debts are causing you grief, then you could consult a financial counsellor.
Financial counsellors can help negotiate with your lenders and debt collectors.

Christine at Financial Care Services your independent adviser

Christine at Financial Care Services is an independent adviser specialising in retirees of modest means and aged care entrants.
Our core values include working with clients in claiming DVA and Centrelink entitlements.

Christine at Financial Care Services is here to answer your Health Card and Age Pension questions and guide your understanding of aged care costs.

Help with Centrelink challenges is available from Christine Hopper at Financial Care Services, the specialist adviser to seniors in transition to new lifestyles.

Christine has neat handwriting just right for inserting your data into small printed spaces.
She helps clients complete Centrelink forms.
Christine could help you with collating your supporting documents and then mailing your form to Centrelink.

Assistance with completing Age Pension, Low Income Health Card and Commonwealth Seniors Health Card Claims and the Commonwealth aged care means testing forms is available to clients of Christine at Financial Care Services.

Christine charges fees based on the work involved in advising you about health cards, pensions and aged care fee solutions.

To make an appointment for confidential, independent and professional advice about aged care, retirement lifestyle costs, granny flat or Age Pension issues please contact Christine Hopper or call +61 3 9808 0338.
______________________________

Christine Hopper
Financial Care Services
Independent aged care, strategic lifestyle and Social Security advice for seniors in Melbourne, Victoria, Australia
Telephone – call +61 3 9808 0338
Email – contact Christine@financialcareservices.com.au
Address – mail to 2B Thomas Street, Camberwell Victoria 3124
Website – visit financialcareservices.com.au
LinkedIn – connect https://www.linkedin.com/in/christinehopper1
Past newsletters – see http://financialcareservices.com.au/newsletters/
Newsletter – subscribe http://eepurl.com/js41T

Disclaimer: The information contained in this newsletter is of a general nature only and does not constitute “financial advice”.
All eligibility for Commonwealth benefits will be determined by Centrelink or DVA, based on your personal position as documented and the legislation and Regulations in force at that time.