Financial Care Services Newsletter

by Christine Hopper
Volume 13 Edition 6 – 30 June 2023

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

Gifting

Winter is here and the financial year is coming to a close.
The two main indicators are the shorter daylight and the flood of appeal letters from every charity and worthy cause that I have ever met.
These early indicators of the approaching end of financial year are appealing for tax deductible charitable donations.

If you are a Centrelink Pensioner you might not be seeking ‘tax deductible’ donation opportunities.
But were you planning substantial gifts to your family that could have implications for your Centrelink position?

What is gifting at Centrelink

At Centrelink, gifting is giving away an item including money, or selling an item for less than its reasonable value.
Gifting at Centrelink also includes failing to take up an entitlement.

For example, Joe has surrendered his Driver Licence and hands his car over to his grandson, Tom.
The car has a value of $7,000 but Joe does not want any money from Tom.
At Centrelink, Joe has gifted an item valued at $7,000.

Dora helped her daughter, Sue, buy her first home by lending Sue $40,000.
The loan agreement between Dora and Sue states that interest is to be paid at the rate of 5% per annum.
Charging Sue interest on the loan would make the loan look ‘fair’ to Sue’s siblings.
In practice, Dora has not asked, or expected, Sue to pay any interest on her loan as Sue is struggling just to pay her bank mortgage.
Centrelink could say that Dora is failing to collect her interest payments.
Dora is neither collecting the annual interest from Sue nor recording that Sue’s loan amount has increased by the accumulating interest.
Thus, Centrelink could treat Dora as ‘gifting’ the annual interest payments to Sue.

Eric transferred an interest in the family holiday house to his adult children.
Eric retained 25% interest in the coastal property and granted his three children 25% interests.
The children each paid Stamp Duty on the transfer of their interest in the Title.
At Centrelink, Eric has transferred 75% of the value of the property for no payment.
The date the change of ownership is recorded on the property Title would be the date of the gift for Centrelink purposes.
Centrelink could record the value of the gift as 75% of the value of the property used for the Stamp Duty asessment.
Therefore, Centrelink could record Eric gifts as 75% of the value of the property granted on the date effective date of the property Title changes.

Why does gifting matter for Centrelink Pensioners

The Australian Social Security system provides a safety net income for citizens who are unable to support themselves from work.

The Age Pension is for senior citizens who are “too old to work” enough to support themselves after they have attained Age Pension Age.

The Centrelink Disability Support Pension, DSP, provides an income benefit for citizens who are “permanently incapacitated” such that they would never be able to work fifteen hours per week.

But the Australian taxpayer is only going to finance Centrelink Pensions for citizens who have few financial resources of their own.
Hence the payment rates for the Centrelink Pensions are means tested.

Honest taxpayers are unimpressed by seniors who give away their savings or other valuable assets, and then expect the full Age Pension.

To protect the taxpayer, the Centrelink Pension means testing has rules about gifting.

You can still give away as much as you like whenever you like but part of your gifts could be ‘excess gifting’ for the Centrelink Pension means tests.

Excess gifting for Pensioners at Centrelink

As a Centrelink Pensioner, you may give away as much as you choose whenever you choose.
But if the total of your gifts in this financial year exceeds $10,000 then the part in excess of the $10,000 gifting Allowance will be an ‘excess gift’ for the Centrelink Pension means tests.
Looking back five years from the date of each gift, any excess of your total gifts over $30,000 is also an ‘excess gift’.

The gift Allowances of $10,000 in any financial year and $30,000 over any rolling five year period, are the same for single pensioners as for couples at Centrelink.

Whenever Centrelink undertake any means testing assessments, your ‘excess gifts’ are treated as ‘financial assets’.

Thus your ‘excess gifts’ will be treated as just like additional money in your bank account.

Expiry of excess gifting for Age Pensioners at Centrelink

Five years after you made a particular gift that gift ceases to be counted in the calculation of your ‘excess gifting’ amount.
Thus your ‘excess gifting’ will expire after five years.

Large gifts in recent years could impact your current Centrelink position.

Ongoing Age Pensioners could expect Centrelink to adjust their Age Pension payment rate on the expiry of each excess gifting amount.

Other seniors could consider applying for an Age Pension five years after their last substantial gifts.

Beware, the Centrelink gifting rules could impact a self-funded senior who is unlikely to ever qualify for an Age Pension.

Read more about the impact of gifting by Age Pensioners.

Gifting before entering permanent residential aged care

Commonwealth regulated aged care requires means tested contributions from the care recipients.

Centrelink undertake the data collection and means tested care fee calculations on behalf of the Commonwealth.
Thus receipt of a ‘home care package’ or entry to permanent residential aged care, could be your introduction to Centrelink.

Seriously wealthy aged care recipients pay full care costs until Lifetime Cap attained

A seriously wealthy self-funded retiree might choose to just provide Centrelink with ‘proof of identity’ as a long term citizen, or ‘permanent resident’, of Australia.
These aged care residents pay the full cost of their ‘personal support and nursing care’ until their payments reach the Annual Cap on Means Tested Care fees.
Then the Commonwealth pays their ‘personal support and nursing care’ costs until the anniversary of their entry to permanent residential aged care.

The ‘personal support and nursing care’ fees restart on each anniversary of entry to permanent residential care until the total ‘personal support and nursing care’ fees paid reaches the Lifetime Cap.

Aged care residents with lower care needs might never reach the Annual Cap on fees for ‘personal support and nursing care’.
But if they stay long enough in residential aged care their total fees for ‘personal support and nursing care’ might reach the Lifetime Cap.
Then the Commonwealth pays for their ‘personal support and nursing care’ costs for the remainder of their lives.

Self-funded entrants to residential aged care might pay less than full care costs

In contrast, a less wealthy self-funded entrant to residential aged care could be seeking some Commonwealth subsidy for ‘personal support and nursing care’ costs.

These aged care entrants would need to submit full Income and Asset data to have Centrelink calculate their Means Tested Care fees.
Their full history of ‘gifting’ would need to be included in their Income and Assets data form for the Centrelink Means Tested Care fee determination.

Help to understand the costs of residential aged care for your family.

Christine at Financial Care Services helps clients to understand the costs of placing a family member into residential aged care.

Christine could illustrate the various accommodation costs and means tested care fees that could be levied for your preferred aged care place.
You could ask Christine to illustrate some different Accommodation Room Prices so that you do not sign up for a place that would unduly stretch your family finances.

Christine at Financial Care Services is an independent adviser specialising in retirees of modest means and aged care entrants.

Contact Christine Hopper or call +61 3 9808 0338 to arrange an aged care consultation.
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Entering permanent residential aged care from a granny flat arrangement

Your ingoing payment for a granny flat arrangement would be treated as a ‘gift’ to your granny flat hosts if neither you nor your partner, stay in the granny flat arrangement for at least five years.

Consider Mavis who paid her son $300,000 for a lifetime of accommodation with him and his family.
Mavis was strong and healthy being just seventy years old when she entered this granny flat arrangement.
The ‘granny flat’ agreement between Mavis and her son did not mention the possibility of an early termination of the granny flat arrangement.
Alas two years after entering her granny flat arrangement, Mavis had a major stroke.
Mavis could no longer walk or even stand up by herself.
Mavis had to transition from the rehabilitation hospital directly into permanent residential aged care.
At Centrelink, the granny flat ‘ingoing amount’ of $300,000 would be treated as a gift to the granny flat host for the balance of the five years from when Mavis paid her son.
But the granny flat agreement did not provide for repayment of any part of the ‘ingoing amount’ if Mavis had to leave the granny flat.
Thus Mavis has an ‘excess gift’ amount of $290,000 to be counted by Centrelink when assessing her means tested amounts for permanent entry into residential aged care.
Mavis has a further problem in financing her essential aged care.

Ask Christine Hopper at Financial Care Services for help with planning your granny flat arrangement.

Christine could help you think through the Centrelink implications of starting and exiting, a granny flat arrangement.
Your granny flat arrangement could consider ‘what if’ you needed ‘help to stay at home’ or residential aged care, and ‘what if’ life events happen and you all need to exit the granny flat arrangement.

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

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.
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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/
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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.