10. Assessment of Income and Assets

Question 1

1. What is the Government’s rationale for the social security system?

Answer 1

It is intended to be a safety net for those who cannot provide an adequate standard of living for themselves.

Question 2

2. How is eligibility determined?

Answer 2

Through a means test which includes an income test and an asset test and the one which has the lowest amount is the one which applies.

Question 3

3. Which class of pensioners are not subject to the income and assets test?

Answer 3

Blind people

Question 4

4. What is included in income?

Answer 4

• gross income from earnings
• gross pension paid from a superannuation fund
• income received from rental property
• net profit from a business including farms
• deemed rate of return from financial investments
• income received from immediate annuities
• family trust distributions
• from 2009 - reportable super conts and total net losses from rental property or investment income.

Question 5

5. What is the ‘deeming’ rate of return and why is it used?

Answer 5

It is the rate of return applied to any investment regardless of the actual return generated. It was implemented to stop pensioners seeing out low return investments in order to increase the pension to which they were eligible.

Question 6

6. What are the current deeming rates for a single person and couple?

Answer 6

Single - first $46.6K 2% and over this 3.5%

Couple - first $77.4K 2% and then 3.5%

Question 7

7. What products are excluded from the deeming rules?

Answer 7

• superannuation pensions
• account based pensions
• immediate annuities

Question 8

8. What forms of income are excluded from the income test calculation?

Answer 8

• Workers comp is calculated under a separate test
• rent subsidy paid by govt
• most payments by FaHCSIA
• Compensation for loss/damage to building, plant or personnel
• payments in respect of a dependent child
• education supplement paid to a person receiving a pension, benefit or allowance.

Question 9

9. What are considered assessable assets for the assets test?

Answer 9

• house contents and personal effects
• holiday homes
• motor vehicles, boats, caravans
• value of loans to family members & institutions
• surrender value of life insurance policies
• value of business and farms, inc goodwill
• cash or money on deposit with financial institutions
• investment in shares, property trusts, etc.

Question 10

10. Pensioners are required to list the asset’s net market value, what does this mean?

Answer 10

The amount for which the asset could be sold, less any debts which may be owning on the asset such as a mortgage or hire purchase debt.

Question 11

11. What assets are excluded from the assets test?

Answer 11

• special aids for disabled
• value of cemetery plot, prepaid funeral expenses & up to 2 funeral investment bonds (limited to $11K)
• value of any accommodation bonds for low level care
• value of awards for valour not held for investment purposes
• proceeds from the sale of a home which will be used within 12 months to buy another home
• amounts invested in a rollover or superannuation fund
• home

Question 12

12. In order to qualify for a full pension what level of income must the pensioner be under for both a single and couple?

Answer 12

Single - under $156 p/f

Couple - under $276 p/f

Question 13

13. What is the reduction factor for the income test and at what amount does the pension payable become zero?

Answer 13

50 cents for every $1 above limit. Cuts out:
Single - $1810.20
Couple - $2769.60

Question 14

15. What is the reduction amount above the limits?

Answer 14

$1.50 per fortnight for every $1000 over the limit.

Question 15

14. What are the maximum pension rates per fortnight? (excluding supplements)

Answer 15

Single $751.70

Couple $1,133.20

Question 16

15. Explain the difference between income and asset tests for allowances compared to the age pension?

Answer 16

• They are more stringent
• Full payment of allowance relies on income less than $62 p/f
• Lower cut off point as well

Question 17

16. How is the asset test for allowances more stringent than the test for pensions?

Answer 17

If an allowee’s assets exceed the Pension threshold asset limit, there is no payment at all. The sliding scale existing in the age pension does not exist.

Question 18

18. What is allowable in terms of gifting?

Answer 18

• $10,000 per year is allowed, with up to $30,000 over a 5 year rolling period

Question 19

19. If the gifting rate is exceeded how is the amount treated?

Answer 19

It is treated as a deprived asset for five years from the date of disposal and will be included in the asset test and at ‘deeming’ rates for the income test.

Question 20

20. What items would be considered as gifting?

Answer 20

• money or assets transferred to family members or trusts
• gifts to other people or charities
• assets sold for less than their market value

Question 21

21. Can assets gifted prior to assessing for the age pension be included?

Answer 21

Yes any amounts / assets disposed of or gifted in the five years immediately before you were granted a payment are also considered.

Question 22

22. How are monies in retirement income streams treated?

Answer 22

• prior to pension age super fund money is exempt from the income and assets test unless a pension has commenced
• after pension age the superannuation is treated as any other financial asset
• if taken as a pension, the income is assessable under the income test and the balance is assessable under the asset test.