Make sure you aren’t missing out! article by Tracey Roberts Financial Planner
Are you missing out on valuable Centrelink benefits because your assets aren’t correctly structured? Sometimes, restructuring your assets can give you access to benefits like Newstart, a pension card and/or part aged pension!
Check with your financial planner to see if they can help or call Tracey Roberts at Foundation Planning Pty Ltd 07 5631 4343 or 0403 844 071 who wil be happy to have an obligation free chat (tracey_roberts@netspace.net.au).
Here’s a couple of examples of what can sometimes be achieved.
Case Study
Reg (age 65) and his wife Carolyn (age 60) have the following assets:
- Home – $300,000
- Super – $380,000 (Reg}
- Bank account – $10,000 (joint)
- Car – $20,000
- Home contents – $10,000
As Reg has recently reached Age Pension age and retired, he would like to apply for the Age Pension. Carolyn has been receiving Newstart Allowance for the past few years. If Reg uses his entire superannuation balance to commence an allocated pension, he would be entitled to a part Age Pension of $448 per fortnight ($11,648 per annum). Carolyn’s Newstart Allowance would cease as their combined assessable assets now exceed the lower assets test threshold of $265,000*.
Reg decides to cash in $170,000 of his superannuation benefits. This withdrawal will be completely tax-free^ as Reg is over age 60. Reg will then use this money to make a spouse superannuation contribution into Carolyn’s superannuation fund. Reg will commence an allocated pension with his remaining superannuation balance. As a result of this strategy, Reg & Carolyn’s assessable assets have been reduced by $170,000 to $250,000, which is below the lower assets test threshold of $265,000*.
Reg will qualify for a full Age Pension of $564.50* per fortnight ($14,677 per annum).
Carolyn will continue to qualify for a full Newstart Allowance of $428.70* per fortnight ($11,146 per annum). This results in combined social security benefits of $25,438.40 per annum. Further, while it is not likely to be applicable in this scenario, depending on their income position for the entire financial year, Reg may also be eligible for a spouse contribution tax offset of up to $540.
^ However, Flood levy of approximately $1,093 will apply.
* Rates and thresholds used are current to 31 December 2011. Rates include Pension Supplement for Reg.
Case Study
Sam (age 56) is single, owns his home, and has been unemployed for three months. His assets consist of the following:
- $15,000 in the bank
- $180,000 in managed investments (subject to deeming under the income test)
- $75,000 in superannuation
As his assets (excluding superannuation) exceed the $186,750* asset test threshold, Sam is not eligible to receive any Newstart Allowance. Sam would like to receive some Newstart Allowance to help meet his living expenses and he is not averse to increasing his superannuation balance. He accepts his financial planner’s advice to make a $145,000 non-concessional contribution (using his managed investments) into his superannuation fund. Following this contribution, the level of assets counted under the assets test is reduced to $50,000. The level of deemed income (from the managed investments) under the income test is also significantly reduced.
Sam is now able to receive the full amount of Newstart Allowance of $486.80 per fortnight*
or $12,657 per annum.
* Rates used are current to 31 December 2011.
Foundation Planning Pty Ltd
ABN 93 150 110 517
Authorised Representatives of AMP Financial Planning Pty Limited
Ph: 07 5631 4343 Fax: 07 5522 8836 Mob: 0403 844 071
PO Box 35, Mudgeeraba, QLD 4213