income – Adelaide Financial Advice

Age Pension Update – July 2019

August 15, 2019/in Financial Advice General Info /by Shellie Fisher

On the 1^st of July the age pension asset and income thresholds increased, in addition to the increase in these thresholds the levels at which the deeming rates of interest are applied also increased.

Two weeks after this date the government announced that the deeming interest rates would be reduced. The lower rate dropping from 1.75% to 1% and higher rate falling from 3.25% to 3%. This drop in deemed interest rates will be effective from the 1^st of July but will not be adjusted for age pensioners paid under the income test until the end of September. Any increase in the age pension will be back dated to the 1^st of July.

The following tables provide an overview of the changes as well as upper limits from an asset’s and income perspective:

ASSETS TEST

Assets test threshold for full pension:

	For homeowner’s assets must be less than:	For non-homeowner’s assets must be less than:
Single	$263,250	$473,750
Couple combined	$394,500	$605,000

Assets test upper limits:

	For homeowner’s part pension assets must be less than:	For non-homeowner’s part pension assets must be less than:
Single	$572,000	$782,500
Couple combined	$860,000	$1,070,500

INCOME TEST

Single:

Fortnightly income	up to $174 pf	Full payment
Reduction in payment	over $174 pf	50 cents for each dollar
Upper limit	$2,026.40 pf	No entitlement

Couple combined:

Fortnightly income	up to $308 pf	Full payment
Reduction in payment	over $308 pf	50 cents for each dollar
Upper Limit	$3,100.40 pf	No entitlement

For those retirees receiving a part age pension, the benefits of the increase in the thresholds are seen immediately with an increase in the first age pension payment they would receive in July.

However, for the retiree who is not in receipt of an age pension it is not as simple.

The first step for this retiree is to review their current assets or income position against the new upper thresholds, if they are under the new thresholds now is the time to lodge an application for the age pension.

If they are still just above the thresholds, by only a few thousand dollars now is the time to talk to an adviser about the benefits of a gift of up to $10,000 or the purchase of a funeral bond, up to the value of $13.250. Both strategies will reduce their assets and possibly their income under either the income or assets test.

The minimum pension that can be paid is not $1 per fortnight but $36.70 per fortnight for a single age pensioner or $55.40 per fortnight combined for a couple.

Source: Mark Teale | Centrepoint Alliance

Federal Budget Overview – 2019

April 11, 2019/in Financial Advice General Info /by Shellie Fisher

On 2 April 2019, The Hon Josh Frydenberg delivered his first Budget as Federal Treasurer.

The good news is that the Budget has forecasted a return to surplus of around $7.1bn in 2019-20. Australian will earn more than it spends!

Ten million low and middle-income earners are the winners as they will receive an immediate tax cut, which is being delivered by way of an increase in the Low and Middle-Income Tax Offset (LMITO). The increase will be available for the next three years and will see the LIMITO more than double. An amount of $1,080 for Australians with taxable income of between $48,000 and $90,000. A more modest offset is available for those on lower incomes, and the offset cuts out when taxable income reaches $126,000.

It has been estimated that by 2024, 94% of Australians will have a marginal tax rate of 30% or less.

By contrast, the top 5% of income earners will pay a third of all taxes collected.

Australians who receive a range of government income support benefits will receive a one-off payment of $75 for singles, and $125 for couples, to help with their energy bills. This payment is planned to be made before 30 June 2019.

Superannuation was largely untouched in this year’s Budget, however, from 1 July 2020, people aged 65 and 66 will be able to make super contributions without having to meet the work test and the maximum age spouse contributions can be made is to be extended from 69 to 74.

Infrastructure and health received injections of cash.

Expect to see the skyline silhouetted with cranes. The Government has announced further significant spending on roads, rails, airports and the like.

Included in the Budget was an allocation of $500m to get cars off the roads by building more commuter car parks, therefore encouraging people to travel by train. For anyone who tries to navigate capital city peak hour traffic, this will be welcome news.

Small to medium businesses will benefit from the planned increase in the instant asset write-off for purchases of up to $30,000.

Older Australians have not been ignored with an additional 10,000 aged care home care packages being announced and a further 13,500 residential aged care places being made available. With the aged care system being strained with the increasing demand for services and support this is welcome news but sadly is nowhere near enough.

Additional funding has also been directed towards the delivery of primary and frontline health care.

Legislation will need to be passed in order for the changes to be implemented.

Source: Peter Kelly | Centrepoint Alliance

Is it time to apply for the Age Pension?

October 25, 2018/in Financial Advice General Info /by Shellie Fisher

On 1 February 2019, many people will turn 65 years and 6 months. Why is this important? For those people who turn 65 years and 6 months, it means they have reached age pension age.

Just over 70% of these people will be eligible for either a full age pension or a part age pension. The first step in the process is applying for the age pension – sounds simple doesn’t it?

A person’s age pension entitlement is based on, not only their age, but also on their personal situation, their income and assets.

Regardless of what we may think, the government is not aware of many aspects of your financial position. This means you need to complete an Application for Age Pension which consists of 25 pages and asks a total of 94 questions. In addition to this form, you also need to complete an ‘Income and Assets form (Form SA 369)’, which consists of 18 pages and 60 questions.

Depending on the answers you give to the questions asked on the Income and Assets form, you may have additional forms which you need to complete.

Sounds like a very long and exhausting process. The good news is that you do not have to wait until you turn 65 years and 6 months to apply for the age pension. You can lodge your claim 13 weeks before you turn the qualifying age, which means for those people who turn 65 years and 6 months on the 1 February 2019, you can lodge your application on the 2 November 2018.

Once you have completed the required forms, you can lodge the application in several ways:

Online via your ‘myGov’ account. This needs to be linked to your Centrelink account which you need to set up with your Customer Reference Number (CRN). If you have received payments from Centrelink previously you will have a CRN. If not you will need to apply to Centrelink for a CRN. Centrelink will also need to confirm your identity before you set up your account.
Via post to the Department of Human Services in Canberra. If you choose this method I would suggest photocopying all the documents you intend on posting and using registered mail to ensure you have a record of the application being sent.
Lodge your application in person at your local Centrelink service centre.

To assist you in this entire process there is another form Ci006 ‘Information you need to know about your claim for Age Pension’, I also suggest a visit to the Department of Human Services website is a must – https://www.humanservices.gov.au/individuals/services/centrelink/age-pension

If this all appears a little daunting, talking to an expert and paying them for their assistance could be the best option.

Source: Mark Teale | Centrepoint Alliance

Time to review your Account Based Pension?

September 13, 2018/in Financial Advice General Info /by Shellie Fisher

On the 1st of January 2015, the age pension assessment of account-based pensions changed. Assessment of account-based pensions was brought in line with other “financial Investments”.

What does this mean?

The balance of the account-based pension, regardless of the income being drawn down, was assessed in the same way as money invested in bank accounts, shares, and managed investments. Income was calculated by deeming an interest rate of either 1.75% or 3.25% – the rate depends on the balance of your other financial assets.

For retirees in receipt of age pension at the time, this new method of assessing account-based pension income could have resulted in a reduction in their age pension. To ensure retirees were not disadvantaged the previous method of assessing account-based pension income was “grandfathered”.

This “grandfathered” assessment was based on the following;

The amount of capital used to commence the pension is divided by the life expectancy of the pension recipient (or the longer of the two pension recipient’s life expectancies, where a reversionary pensioner is nominated). The result amount is referred to as the “deductible amount”. This amount remains constant for the life of the account-based pension unless a lump sum withdrawal is made from the pension account, at which time the deductible amount is recalculated.
The amount of the account-based pension income currently assessed under the “grandfathered” income test is the actual income drawn from the account-based pension, minus the deductible amount. Providing a person did not roll their account-based pension to a new provider the old assessment was retained. However, like all good investments and strategies in retirement – regardless of legislative change – they should never be viewed as a set and forget

All investments and strategies should be reviewed on a regular basis and account-based pensions are no exception. The first point to consider when you are reviewing your account-based pension – as a pensioner ages the amount of income that is required under legislation to be drawn from your ABP increases, meaning that a person rather than being disadvantaged by the new rules could, in fact, be better off being assessed under the new legislation.

The second point concerning the income being drawn from an account-based pension occurs when a pensioner enters aged care and they need to draw more income from the account-based pension to cover their fees.

The following example may make it a little easier to understand;

At the age of 65, a single man invested $300,000 into an account-based pension and was drawing an amount of $15,000 as income on an annual basis. At the time of this investment, his life expectancy was 15.41 years, meaning $19,467 ($300,000 divided by 15.41) was assessed as his “deductible amount”. So, providing he did not draw a yearly pension in excess of this “deductible amount” his age pension was not affected by the application of the income test.

This gentleman is now 85 years of age and has entered residential aged care. To assist in paying his aged care fees he is now drawing $30,000 per annum from his account-based pension which means an amount of $10,533 per annum ($30,000 – $19,467) is being assessed as income for the purpose of calculating his age pension and his aged care fees.

If this gentleman were to roll his account-based pension which is now only $250,000 to a new provider, the pension would now be assessed under the new legislation in other words deemed at the interest rates mentioned earlier in the article and only $7,357 per annum would be assessed as income. This would mean his age pension would increase slightly, and his aged care fees would reduce by a small amount.

This does sound very complicated, but the very point of this blog and the examples shown demonstrate that as your circumstances change you do need to review your position to ensure you are not being disadvantaged. The best person to speak to is a financial planning expert who understands legislation and has the necessary experience to point you in the right direction.

Source: Mark Teale | Centrepoint Alliance

Budget 2018 – What does it all mean?

May 17, 2018/in Financial Advice General Info /by Shellie Fisher

What does this year’s budget have to offer?

With a federal election clearly in the wind, the budget contained a little bit of something for almost everyone.

Unlike the 2016 budget that included massive changes to super, this year’s budget was a lot lighter in terms of super announcements. However, there were a few including:

Allowing people aged between 65 and 74 to make voluntary contributions super in the year after they cease working, without having to meet the work test. This will apply from 1 July 2019.
Increasing membership of self-managed super funds from four to six, from 1 July 2019.
Moving to a three-year audit cycle for SMSFs with good record keeping and compliance history. This will commence from 1 July 2019.
The ability for younger people and those with less than $6,000 in super to opt-in for life insurance cover inside their super. This differs from the current system where they have to opt-out if they don’t want life cover.
Some relief from the risk of breaching the concessional contribution cap for people earning more than a combined $263,157 from more than one employer.

The budget also contained some immediate tax relief for low to middle-income earners with the introduction of a Low to Middle Income Earners Tax Offset of up to $530. This will apply from 1 July 2018 and will be paid as a lump sum at the end of the financial year once an income tax return has been lodged.

There will be tax cuts across the board, however, significant changes, particularly for higher income earners, won’t come in to effect until 1 July 2024.

On the good news front, the planned increase in the Medicare Levy that was due to come in from 1 July 2019 is no longer proceeding.

The big winners from the budget were older Australians with considerable funds being directed to the delivery of residential and in-home aged care services.

The budget makes proposed changes to the Pension Work Bonus to take effect from 1 July 2019, which allows people to earn more from employment and self-employment in retirement without it affecting their age pension, and an expansion of the Pension Loans Scheme. The Pension Loans Scheme enables people to access a government-sponsored reverse mortgage scheme to top up their pension payments.

Source: Peter Kelly | Centrepoint Alliance

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