Financial Assets for deemed financial income calculation
Why Age Pensioner Financial Assets
The Age Pension Income Tests use your ‘deemed income’ rather than your actual income from ‘financial assets’. Therefore, you need to identify your Centrelink Age Pensioner financial assets before you can calculate your deemed financial income.
Your ‘financial assets’ for Age Pension means testing includes all of the financial assets that you and/or your partner own.
You only need to include your share of a financial asset that is jointly owned with someone other than your partner. For example, if you and your brother jointly own some gold coins then you need only include your half share of the value of the gold coins in your financial assets.
If you are the beneficial owner of a financial asset then Centrelink will include it in your ‘financial assets’. This means that assets that you hold within a private company or trust structure, will be treated in the same way as assets that you own directly in your own name.
What are Age Pensioner Financial Assets
Centrelink will include in your financial assets any of the following items that you or your partner own or have a beneficial interest in.
Age Pensioner financial assets include
• Basic banking accounts in credit, that is with positive balances and term deposits
• Deposits with building societies, credit unions, church development funds, “community funds” and “holiday clubs”.
• Securities listed on a stock exchange, in Australia or overseas, such as shares, corporate bonds, debentures and every type of exchange traded fund, futures or options contract.
• Government bonds or notes issued by an Australian Commonwealth, State or local municipal authority or any government outside of Australia.
• Investments in managed investment funds, investment bonds and friendly society bonds
• Debentures, unsecured notes or any other form of loan to a business or private company.
• The surrender value of any life insurance policies that have an investment component and could be surrendered for a cash payment.
• Cash, foreign currency and gold coins plus gold bullion and other precious metals
• Both carefully documented and informal loans to family and friends. If you did not get adequate value for any money that has gone from you to someone else then that money could be a “loan” or a “gift” at Centrelink. A “loan” usually implies eventual repayment or remembering of the amount as part of the lender’s estate in his Will. A donor does not expect a “gift” to be repaid.
• Money due to you from anyone else such as uncollected debts from the sale of assets, or inheritances due for distribution from an estate.
• Funeral bonds that are more valuable or spread across more contracts, than the current Centrelink limits allow.
• Superannuation accounts in accumulation phase and allocated pension account balances.
• “Excess gift amounts” that is, the total value of money or assets that you and/or your partner have gifted in the last five years in excess of the Centrelink Pensioner gifting limits.
• Financial assets held in a trust which pays you the investment income even if you are not entitled to access the capital, that is, you have only a ‘life interest’ in the trust.
Offsetting amounts that you owe
The general rule is that you cannot reduce the amount of your financial assets by deducting the amount you owe from the value of the financial assets that you own.
Thus you cannot offset the amount owing on your credit card against the positive balance in your savings account. Smart Age Pensioners pay all of their credit cards and other bills before reporting their financial assets to Centrelink.
Similarly, if you extended your home mortgage to provide the cash to purchase listed shares then you could not deduct the additional mortgage loan from the value of the shares when calculating your financial assets.
The exception is that loans secured against a particular financial asset may be deducted from the value of that financial asset only. For example, if you have bought fifty thousand dollars worth of listed shares using thirty thousand dollars of your own money together with a loan for twenty thousand dollars secured against those shares, you could deduct the outstanding loan amount from the value of the shares. Thus, financial investments purchased with margin loans may be counted at the net value of the underlying investment asset less that margin loan, the net value of the whole contract.
Exclusions from Age Pensioner Financial Assets
Centrelink exclude some items from “financial assets” for Age Pensioner income deeming.
Some special excluded items
• Superannuation accounts in accumulation phase whilst the owner has not attained her Age Pension Age.
• Lifetime and long term annuity contracts. These annuity contracts are subject to special rules to determine the “income” to be counted for the Age Pension Income Test.
• Any pre-2015 superannuation allocated pension accounts that were counted in the means testing for your Age Pension in force on 31 December 2014 provided that you have not changed the contract or had your Age Pension stopped for any reason. These ongoing Centrelink customers could continue to have their superannuation allocated pension accounts treated like annuities provided that their contract is not changed.
Note that this special exclusion will cease to apply and the balance of your superannuation allocated pension accounts will be counted in your ‘financial assets’ if the pre-2015 superannuation allocated pension is commuted for a lump sum. Thus the exclusion ceases to apply on commutation of the superannuation allocated pension account even if you use the lump sum to establish an identical superannuation allocated pension contract with another superannuation fund.
Help to understand how your situation fits in the Age Pension system.
Christine at Financial Care Services writes this Age Pension Guide. She can help you to understand your Age Pension situation.
Ask Christine to help you navigate your Age Pension challenge.
Contact Christine at Christine@financialcareservices.com.au or call 03 9808 0338 to book a consultation.
Christine at Financial Care Services is experienced with Pension Applications and the many Centrelink financial means tests.
Financial Care Services helps seniors with Centrelink Pension issues. Christine at Financial Care Services could help you check if you are eligible for an Age Pension.
An estimate of your potential Age Pension amount before you apply could spare you a rejection letter from Centrelink.
Financial Care Services offers ‘personal financial factual information’ consultations to help you check your asset and income position against the Centrelink Pension means tests. Christine is also able to assist with filling in your Centrelink forms ready for you to sign. She will accompany you to a Centrelink office to lodge your Pension claim form and show your proof of identity documents.
Financial Care Services charges hourly rate fees for ‘personal financial factual information’ consultations, assistance with personal data collation, completing Centrelink forms and attendance at a Centrelink office with you. Email Christine@financialcareservices.com.au now for the Financial Care Services Client Services Guide and Financial Care Services Age Pension Personal Data Checklist.
Disclaimer This Age Pension Guide is based on our understanding of the current Social Security provisions. Your claim for a Social Security Pension will be based on your personal situation as documented to Centrelink and the Social Security legislation and Regulations in force at that date.
Updated September 2018
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