Marital status: it's complicated

They are questions that pop up often – “what is your marital status? Do you have a partner? and – if yes – is your partner living with you?”

These are some of the first questions normally asked on most application forms – whether it be for a credit card, bank loan, driver’s licence, passport, insurance claim, or even a club membership. The list is endless and, in most cases, these questions have very simple answers.

Answering these questions are very important when calculating someone’s social security entitlement, and can have a bearing on the amount of benefit an individual may be entitled to receive.

For example – as one member of a couple, a person may be allowed to an age pension of up to $653.50 per fortnight. This is the equivalent of half the ‘couple rate’ of $1307 per fortnight. The maximum age pension paid to a single person is currently $867 per fortnight – an additional $213.50 per fortnight.

While you are filling out these forms, and becoming aware of these rates, you might think – “all I need to do is tick the single box to receive a higher benefit. Surely a little white lie is not going to hurt anyone?”

There certainly have been people who haven’t been completely honest about the status of their relationships in order to receive some additional benefit dollars.

But be warned; if you are tempted to do this, and you are caught, you can be charged with a criminal offence and be fined (in addition to having to repay any overpaid benefits you received).

In extreme case; some jail time may be on the cards. So it is important to think twice before you are tempted to simply ‘tick the wrong box’. Many government agencies like Centrelink, the Australian Taxation Office, and the Department of Immigration and Border Protection share their data.

These agencies have sophisticated computer programs that scan millions of records. Their goal? To uncover any inconsistencies. If you tell the tax office you are part of a couple, but tell Centrelink you are single – it is only a matter of time before you will be asked to explain yourself!

However – there are some situations where people may be paid the single rate of pension even though they may identify as part of a couple.

This becomes very common as people age. It arises when one individual in a couple (or both) are unable to look after themselves and require residential aged care. Social security agencies define these couples as being ‘separated due to illness’. Their entitlement is now based on the single fortnightly rate of age pension, but their assets and income are still assessed as if they are a couple.

Why does the way in which a couple is assessed change when one (or both) members of a couple is living in residential aged care?

An aged care facility charges a number of different fees. One is the ‘daily care fee’ – which is based upon 85 per cent of the single rate of an age pension. So – it’s natural that if a person does have a pension entitlement, and enters a residential aged care facility, it should be calculated on the basis of the single rate of pension to ensure that they are not disadvantaged.

The second scenario is similar.

When a couple is living separately due to one member living in care as a result of a severe and debilitating illness, a determination can be made that states that they are ‘living separately and apart’.

To provide some clarity let me explain in detail by using the following example:

A financial adviser was providing advice to a woman whose husband was diagnosed with an advanced stage of Alzheimer’s disease. The gentleman was in his late-fifties and needed to enter residential aged care.

His wife was employed, and her income from employment barred her husband from any entitlement to a Disability Support Pension. Her income also meant that on entering the aged care facility a ‘means tested care fee’ was payable – on top of the daily fee.

After paying the aged care facility fees – the gentlemen’s wife was left with barely enough funds to cover the weekly expenses for herself, and her teenage daughter. She was becoming desperate and was concerned she would have to sell her home in order to meet the aged care fees for her husband – as well as her own ongoing living expenses.

In these circumstances the Australian Social Security Act (1991) allows the husband to be identified as a single person. This is because he is a resident of an aged care facility and is suffering from an illness that is permanent in its nature.

This classification occurs when the husband is unable to provide for his wife in terms of companionship and physical, intellectual, and emotional support.

As a result – her income is no longer assessable for the purposes of his entitlement to the Disability Support Pension, or for calculating his aged care fees. He is paid the single pension, with only his income and his assets being used to determine his entitlement.

There is one potential downside to this situation. In two years, if the residential home that his wife continues to live in is in both names, his share of their home’s value will be considered an asset. At that stage he would also become a non-home owner – with a much higher assets threshold.

Complicated? Without a doubt.

But, even though this scenario is complex, it is an extremely important detail that people need to be aware of. It can mean up to an extra $213.50 benefit per fortnight, which will make a substantial difference to many doing it tough.

The Realise Your Dream blogs are written by Peter Kelly and Mark Teale. More information about the authors can be found here