Volume 9 Edition 7 Financial Care Services Newsletter
Online at Permalink: https://financialcareservices.com.au/newsletters/vol-9-ed-7/
Financial Care Services, the specialist adviser to seniors in transition to new lifestyles
Volume 9 Edition 7 – 31 July 2019
A new financial year with some small acknowledgements of Australia’s low interest rates and low inflation
The Commonwealth has made several small increases in the Centrelink means tests to reflect the current low rates of consumer price inflation. Each of these small increases might generate a small increase in your Age Pension payment rate. Permanent aged care residents could be eligible for a very small reduction in their means tested amount and possibly a small reduction in means tested aged care fees.
Small increases in Centrelink means testing allowances
Effective 1 July 2019, the allowable amounts of Income and Assets for the full rate of Age Pension were increased marginally.
Pensioners can have an additional two dollars per person per fortnight before the Income Test bites.
A single person can now have $174 per fortnight of income before the income test bites. Once her income exceeds $1,859.20 per fortnight, $48,338 for 26 fortnights, the Income Test would cut-off her Age Pension.
A couple at Centrelink can now have a total joint income of $308 per fortnight before the Income Test bites. Once the combined total income of the couple exceeds $2,847.60 per fortnight, $74,030 for 26 fortnights, they would be cut-off from the Age Pension.
The Asset Test Allowances also increased from 1 July 2019
A single Pensioner may now have $473,750 of assets, or a home plus $263,250 of other assets, and not be impacted by the Assets Test.
But if her assets amount to $754,000 or $544,000 plus her home, then the Asset Test would cut her off from the Age Pension as from July 2019.
A couple may now have $605,000 of assets or a home plus $394,500 of other assets, before the Asset Test impacts their Age Pensions.
Currently a Pensioner couple may have a $817,000 worth of assets in addition to their home and still be entitled to a part Age Pension and the Pensioner Concession Cards.
Read about the July 2019 Income and Asset Test cut-offs for Age Pensions
Deeming rate changeover points increased and the deemed interest rates reduced
As from July 2019, for a single pensioner the deemed income from financial assets will be calculated as 1.0% pa on the first $51,800 of financial assets plus 3.0% pa of any balance above $51,800.
The deemed income of a couple from their combined financial assets will be calculated as 1.0% pa on the first $86,200 of financial assets plus 3.0% pa of any balance above $86,200.
Adjustments to your actual Age Pension fortnightly payment
The increases in the Age Pension means Test Allowances and the deeming rate changeover were determined well in advance of their July start date. These adjustments were applied to the amount of your first Age Pension payment in July 2019.
But the reduction in the deeming rates was not announced until 15 July 2019. Centrelink will be recalculating your deemed interest income amount effective from 1 July 2019.
If you have some financial assets and your Age Pension was impacted by the Income Test then you could expect an increase in your Age Pension payment because of the reduction in the deeming rates.
Centrelink will calculate your new Age Pension payment rate and the amount of ‘back pay’ required to make up for the late adjustment to your Age pension.
Please be patient, the recalculation of deemed income and Age Pension payment rates could mean a couple of months before you see the additional money in your bank account.
Beware, if you have substantial financial assets your Age Pension increase might be small.
But you might not get any increase in your Age Pension if you have substantial assets in addition to your financial assets such that the Asset Test already hits you harder than the Income Test.
Consider Mary a homeowner who has and $200,000 of ‘financial assets’ together with a motor vehicle and personal items worth $20,000 in total.
Mary expects that the reduction in deeming rates will reduce her annual deemed income by $759 from $5,723 to $4,964.
Mary ‘s Age Pension is trimmed by the Income Test only as her total assets amount to less than the Asset Test Allowance for a single homeowner.
Thus Mary expects her Age Pension to increase by $14.60 per fortnight.
Jim is also a single homeowner with $200,000 of financial assets.
But Jim also owns a small car for city driving, a caravan, a boat and a big vehicle to tow them. Jim’s personal items, vehicles and recreational assets are valued at $80,000. Jim’s Age Pension rate is impacted by the Asset Test more severely than the Income Test.
A reduction in Jim’s deemed income from his financial assets will not yield any increase in his Age Pension payment because his Age Pension is cut by the Asset Test.
How much Pension would I get?
The calculation of your Age Pension amount can be challenging. The easy route is to ask for the Age Pension Illustration Personal Data form as a checklist of essential data and then arrange for a ‘$99 Special Age Pension Illustration Short Consultation’ with Christine Hopper of Financial Care Services.
Christine Hopper of Financial Care Services offers Short Consultations for ‘personal factual financial information’ in the form of an Illustration of the amount of Centrelink Age Pension you could receive today provided that you satisfied the age and residency conditions for a Centrelink Age Pension. Contact Christine at Financial Care Services to obtain the Age Pension Illustration Personal Data form. You will also receive our Client Services Guide that provides essential information about Christine Hopper of Financial Care Services.
Alternatively you could search through the Centrelink website for clues about Pension rates and means tests then do the sums yourself.
Consequential aged care means tested amount change
A small increase has been applied to the income allowance in the calculation of the income component of the aged care means tested amount.
This adjustment ensures that a full Age Pensioner would continue to have a nil ‘income component’ in the aged care means tested amount.
The reduction in the deeming rates will reduce your deemed financial income to be included in the calculation of the ‘income component’ in your aged care means tested amount. But your Means Tested Care Fee might not be reduced if your ‘income component’ was already negative. Remember you cannot offset a negative income component against a positive asset component in the aged care means tested amount calculation.
Christine at Financial Care Services your independent adviser
Financial Care Services is an independent advisory service specialising in retirees of modest means and aged care entrants. Our core values include working with clients in claiming DVA and Centrelink entitlements.
The team at Financial Care Services are here to answer your 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 charges fees based on the work involved in advising you about pensions and aged care fee solutions.
To make an appointment for confidential, independent and professional advice about aged care, retirement lifestyle, 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 Pty Ltd
Independent aged care, strategic lifestyle and Social Security advice for seniors in Melbourne, Victoria, Australia
Telephone – call +61 3 9808 0338
Email – contact info@financialcareservices.com.au
Address – mail to 172 Warrigal Road, Camberwell Victoria 3124
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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.
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