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Financial Planning MAA255 > Topic 9 - Social Security > Flashcards

Topic 9 - Social Security Flashcards

1
Q

The reasons that a community allocates taxation revenue to the payment of social security benefits vary from the lofty and philosophical to the mundane and practical. The philosophical reasons include:

A
  • altruism — support for others who are worse off than oneself is considered to be one facet of a civilised society
  • humanitarianism — enjoyment of basic necessities of living is a fundamental human right and all societies should strive to provide these for all members
  • utilitarianism — individuals’ marginal utility (happiness) derived from the expenditure of money decreases as expenditure increases, so redistribution from the better-off to the worse-off will increase the total stock of happiness in a society.
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2
Q

The reasons that a community allocates taxation revenue to the payment of social security benefits vary from the lofty and philosophical to the mundane and practical. The pratical reasons include:

A
  • economic — help given to the needy at relevant times (e.g. the unemployed or temporarily disabled) may facilitate their recovery to become productive members of society and thus the continuation of their contribution to society
  • reduction in crime — needy people given community support do not need to resort to crime to survive, thus protecting the assets of the better-off.
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3
Q

Centrelink is managed through a federal government department (a department which has been the subject of continual change), the Department of Human Services (DHS). The DHS is responsible for

A

The DHS is responsible for the development of service delivery policy and provides access to social, health and other payments and services.

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4
Q

Department of Social Services (DSS)

A

It is responsible for integrated service delivery to the Australian public of a wide range of Commonwealth programs designed to improve the lifetime wellbeing of people and families in Australia

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5
Q

Age pension

A

Ensures that elderly people receive a minimum level of income to meet their retirement income needs.

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6
Q

Benefits for For people raising children

A

Family tax benefit (A)
Family tax benefit (B)
Parenting payment
Child care benefit

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7
Q

Family tax benefit (A)

A

Assists families with the cost of raising children and is paid per child. Eligibility requirements relate to the age of the children and satisfying an income test.

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8
Q

Family tax benefit (B)

A

Provides extra assistance to single-parent families and families with one main income. Eligibility requirements relate to the age of the children and satisfying an income test.

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9
Q

Parenting payment

A

Income support for parents or guardians to help with the cost of raising children.

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10
Q

Child care benefit

A

Assists with the cost of approved and registered child care. Eligibility criteria based on the child attending approved or registered child care, and the parent or carer being liable to pay child care fees and satisfying an income test.

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11
Q

Benefits for For people who are ill, injured or disabled

A

Disability Support Pension

Sickness pension

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12
Q

Disability support pension

A

Provides minimum level of payments to people who are unable to work because of a physical, intellectual or psychiatric impairment.

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13
Q

Sickness allowance

A

Paid to a person who is 21 or older but under age-pension age and who is temporarily incapacitated for work; must have a job or full-time study to return to when recovered.

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14
Q

Benefits for For people who are unemployed looking for work

A

Newstart Allowance

Youth Allowance

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15
Q

Newstart allowance

A

Payments to a person who is registered as unemployed and is over 21. Person must be capable of undertaking work, be available for work or be actively seeking work, or be temporarily incapacitated for work.

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16
Q

Youth allowance

A

Provides income support for full-time students and apprentices aged 16–24. Job seekers aged under 21 must be looking for work, or combining this with part-time study, or undertaking any other approved activity. Paid also to 15-year-olds who have left school and are living independently.

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17
Q

Benefits for people caring for others

A

Carer allowance

Carer Payment

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18
Q

Benefits for students

A

Youth allowance
Austudy payment
ABSTUDY

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19
Q

Concession Cards Types

A

Pensioners Concessionars Card
Health Care Card
Commenwealth Seniors Health care card

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20
Q

Carer payment

A

Income support to a person who provides constant care for an adult and that adult’s dependent child; a person who has physical, intellectual or psychiatric disability; a profoundly disabled child; or two or more disabled children who need care for an extended period.

21
Q

Carer allowance

A

Payments to a person who provides daily care and attention to a person with disability who is a family member aged 16 or over or a dependent child under 16.

22
Q

Youth allowance

A

Provides income support for full-time students and apprentices aged 16–24. Job seekers aged under 21 must be looking for work, or combining this with part-time study, or undertaking any other approved activity. Paid also to 15-year-olds who have left school and are living independently.

23
Q

Austudy payment

A

Payment to a person who is over 25 and satisfies the activity test by undertaking qualifying study or a full-time apprenticeship.

24
Q

ABSTUDY

A

Payments to students who are Aboriginal Australians or Torres Strait Islanders and are studying an approved course of study at an approved education institution or undertaking a full-time apprenticeship.

25
Q

Pensioner concession card

A

Concession card that provides fringe benefits to persons in receipt of certain pension and allowance support. The card provides concessions on pharmaceutical prescriptions, a telephone allowance and access to a number of state, territory and local government concessions.

26
Q

Health care card

A

Concession card that is issued to persons who do not qualify for a pensioner concession card but who are receiving a number of other government income support payments or for those people on low incomes. The card provides concessions on pharmaceutical prescriptions and access to a number of state, territory and local government concessions.

27
Q

Commonwealth seniors health carda

A

Concession card that is targeted at self-funded retirees of age-pension age who do not qualify for an age pension due to assets or income levels. To qualify, the person must have an adjusted level of income of less than $52 796 for singles and $84 472 for couples (effective from 1 January 2017). The card provides concessions on pharmaceutical prescriptions and access to the seniors supplement.

28
Q

To qualify for a social security pension, a person must be a permanent resident by being:

A

an Australian resident for at least 10 years with more than 5 years of continuous residence, with the exception of refugees
in Australia at the time of applying.

29
Q

Age Pension age

A

From 1 July 2017, the qualifying age for the age pension will increase from 65 years to 65 years and 6 months. The qualifying age will then increase by 6 months every 2 years, reaching 67 years by 1 July 2023.

30
Q

The principal rules for the application of the assets and incomes tests are as follows

A

Both tests are applied to pension applications. Asset and/or income levels that exceed a lower threshold reduce the level of pension payment. The test on assets or income that produces the lower benefit is ultimately applied.

Both tests are applied to allowance applications. However, under the assets test, the lower threshold is a cut-out point which causes the payment to be decreased to zero. No allowance is payable where the person’s holding of assets exceeds this lower threshold.

Some other types of payments are not means tested or are not subject to the assets test (e.g. family tax benefit).

31
Q

exempt assets include:

A
  • home
  • prepaid funeral expenses and funeral bonds (up to $12 500 per person)
  • superannuation assets if under age-pension age
  • life interests in assets created by others excluding the applicant’s partner
  • gifts of up to $10 000 per person or couple in a 12-month period provided no more than $30 000 has been gifted in the last 5 years (see gifting rules)
  • accommodation bonds paid on entry to residential aged care
  • the proceeds of the sale of a principal home for up to 12 months, as long as the proceeds are used to buy another home.
32
Q

The types of income generally assessable for social security purposes include:

A
  • gross income from wages and salaries, including reportable fringe benefits and amounts that are salary sacrificed into superannuation
  • income from carrying on a business
  • net rental income
  • family income trust distributions
  • total losses from rental property
  • longer-term annuities. Short-term annuities with a term of 5 years or less and account-based pensions are subject to deeming rules (discussed in the next section)
  • deemed income earned from financial assets (discussed in the next section).
33
Q

Deemed Income from FInancial Assets (Single)

A

The first $51,200 of your financial assets has the deemed rate of 1.75% applied. Anything over $51,200 is deemed to earn 3.25%

34
Q

Single Income Test

A

up to $172 pension reduce by $0

over $172 pension reduced 50 cents for each dollar over $172

35
Q

Couple Income Test

A

up to $304 pension reduce by $0

over $304 pension reduced 50 cents for each dollar over $304

36
Q

Deemed Income from financial assets (couple)

A

The first $85,000 of your financial assets has the deemed rate of 1.75% applied. Anything over $85,000 is deemed to earn 3.25%

37
Q

Asset test free area (single)

A

$258,500 (homeowner)

$465,500 (non-homeowner)

38
Q

Age pension reduces from asset test

A

by $3.00 for each $1,000 above the free area

39
Q

Asset test free area (couple)

A

$387,500 (homeowner)

$594,500 (non-homeowner)

40
Q

Maximum aged pension for single and couple

A

Single $916.30

Couple $690.70

41
Q

Financial investments generally include most forms of investments held by a pensioner such as bank accounts, shares, managed funds, account-based pensions and short-term income streams. However, the following are excluded:

A

life insurance policies
rental properties, holiday homes and other real estate
long-term annuities of greater than 5 years.

42
Q

work bonus.

A

All pensioners over age-pension age, other than recipients of the parenting payment, are eligible for the work bonus. Under the bonus, the first $250 of employment income per fortnight is not assessed and is not counted under the pension income test.

Any unused amount from this $250 in a fortnight can be added to the work bonus bank up to a maximum of $6,500.

43
Q

Cash inflows exempt under the income test include

A
  • lump sums received as home equity - conversion loans
  • general insurance receipts from claims for damage to property
  • capital gains realised on the sale of assets
  • rent subsidies and most other
  • government transfer payments, such as child support payments and carer allowances
  • emergency relief payments
  • medical benefits.
44
Q

The gifting rules allow an applicant to give away, without affecting the pension entitlement:

A

a maximum of $10 000 annually, and

a maximum of $30 000 over a 5-financial-year rolling period.

45
Q

Means testing of allowances

A

However, unlike pension payments, no allowance is paid where the level of assets exceeds the lower threshold.

46
Q

Some of the more common taxable pensions and allowances are:

A

The benefits that are taxable are, in the main, those that are paid in substitute of employment income

age pension
age service pension
Austudy
bereavement allowance
carer payment with some exceptions
disability support pension — for person of age-pension age
Newstart allowance
parenting payment
sickness allowance
widow allowance
youth allowance.
47
Q

Some of the more common non-taxable pensions and allowances are:

A

carer allowance
carer payment — if both carer and the cared-for are under age-pension age
child care benefit
disability support pension — if under age-pension age
disaster relief
double orphan pension
family tax benefit (A) and (B).

48
Q

adjusted taxable income (ATI)

A

Adjustments made to taxable income to determine eligibility for a number of family assistance and DHS payments, and tax offsets and rebates.

Financial Planning MAA255 (9 decks)

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