Not all assets are created equal

I have turned 65, do I just raise my hand?

Not quite. Applying for an age pension when the time comes can be a very daunting proposition.

The application itself is 25 pages long and asks a total of 89 questions. In addition to this form, you will need to also fill in the Income and Assets questionnaire, another 17 pages and a further 55 questions.

You certainly may not be required to answer all the questions, but working your way through the interrogation maze will still require your patience and a degree of care. Please remember these are legal documents and there can be a penalty for supplying incorrect information.

If you are in doubt about any of the questions or the information you have supplied, make sure you talk to someone who understands the forms and what is required.

Your age pension entitlement, as most of us are aware, is based on the information that you supply: assets and income, homeowner or non-homeowner, single or couple, working or not etc etc etc.

Here are a few traps and issues you do need to think about:

1. The value of your household contents and personal effects is “fire sale” value – generally $10,000, not the insured value or the replacement costs. The difference in the two amounts can be quite substantial.
2. Superannuation in accumulation held in a partners name who is under pension age is not an asset and not assessable for the purposes of calculating your age pension entitlement.
3. Shifting assets between partners is not seen as gifting – this can be very effective when you consider tip number 2.
4. Life time or term certain (greater than five years) annuities with a nil residual capital value can be very effective in increasing a person’s entitlement under both the assets test and the income test.
5. A funeral bond up to the value of $12,000 is an exempt asset, for a couple purchasing one each it brings their total of exempt assets to $24,000.
6. Pre-paid funeral expenses and burial plots are also exempt, subject to a couple of conditions (I do recognise that tip 5 and 6 are a little morbid – apologies).
7. Loans to family members (children) which pay no interest, shares in small mining stocks which are speculative and pay no dividend, insurance or investment bonds which also have no return until year 10 will all be classified as financial assets and subject to the deeming provisions even though they pay no income.
8. Selling an asset to a family member for less than what is worth can be viewed as a gift so be very careful. If you are able it may be worth selling or gifting the asset over a couple of years, but do remember the limits of $10,000 per financial year up to a maximum of $30,000 over a total of 5 years.

This is certainly not a comprehensive list of tips and traps but it is an overview of the more common issues which do often arise.

Please remember, as I have mentioned earlier in this article, an application for age pension is a legal document and there can be a penalty for supplying incorrect information or trying to hide assets or details from Centrelink.

If you are unsure about how these forms should be completed when applying for your age pension, talk to a professional who can help.

Realise your Dream

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