O'Donnell Kerr Financial Planners
  • 07 April, 2021

Honesty is always the best policy?

This is an old saying and we hear it a lot.

What does it really mean? Is it that the truth will always come out? By lying you are only 'buying time' and it will probably be worse when it's revealed that you lied?

So, what is the relevance of this quote to this week’s RYD blog? Let me explain.

When a person applies for an age pension one of the first questions on the application is -

Do you have a partner, is your partner living with you?

It is important to remember when claiming an age pension, you do not need to be “married” or of the opposite sex to be viewed as a couple or as having a partner by Centrelink. If you are living together, providing both emotional and physical support, have joint assets and viewed by family and friends as a couple, you will be viewed by Centrelink as having a partner.

So, for the purposes of calculating a person’s Social Security entitlement the question - Do you have a partner, is your partner living with you? - is very important and the answer certainly has a bearing on a person’s pension entitlement.

Being honest when answering this question is extremely important not only from a legal perspective, but also from a personal perspective.

The following story is based on a real-life situation. I have changed the names to ensure I have not breached anyone’s privacy.

Sam and Jean are a couple. They have lived together for over 10 years, have joint bank accounts, are not married, but are viewed by family and friends as a couple. The house they share is in Sam’s name and Jean continues to work, earning more than $100,000 per annum. Sam has turned age pension age and would like to claim age pension; however, he has been advised that as his partner Jean earns over $100,000, he will not be entitled to an age pension.

Sam is not happy and believes he should be entitled to the age pension regardless of what Jean is earning. His logic, even though he too views himself as being in a relationship with Jean, is based on the fact they are not married, and he should therefore be regarded as single.

Sam applies and ticks the box on the application form to say that he is single and is granted the age pension at the single rate, without consideration of Jean’s employment income. It is only a little white lie. What harm can come of it?

Jean is unaware of the situation.

After a couple of years, Sam has become unwell; his health declines rapidly and he needs to enter Residential Aged Care.

For the purposes of calculating his aged care fees, Sam is assessed as a single person, Jean is not viewed as his partner and as such not classified as protected person, meaning Sam’s home which is valued at over one million dollars is an assessable asset.

Sam is required to pay a Refundable Accommodation Deposit of $550,000 and after two years will lose his age pension as the home will becomes an assessable asset for the purposes of his age pension entitlement.

Jean has now become aware of the situation with regards to Sam’s age pension and is extremely upset. Jean is now left in a very difficult position as Sam’s children are wanting to sell the home to fund the aged care fees.

What has become of the situation?

Jean is currently attempting to explain her position and their relationship to Centrelink while at the same time applying for an age pension herself.

At the present time I am not able to provide an end to the story as Jean’s position is still being considered by Centrelink. At best, Sam will have to repay the age pension which has been paid to him over the course of the last few years. This could be as much as $50,000.

I am not judging Sam for the “little white lie” when he filled in his application for the age pension. At the time, he did not consider the consequences of future events.

However as outlined in the story, “honesty would have definitely been the best policy” as the truth did eventually come out and the damage, hurt and distress which this deception caused to the ones that he loved – partner and family – have been immense.

So please remember “honesty is always the best policy” and no matter how small, white lies will eventually come back to bite you in the you know where.

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