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Showing posts from 2015

The Age Pension and Airbnb

We have received quite a few requests for information regarding running and Airbnb – or equivalent – while receiving the age pension. There appears to be two reasons why people are considering this option: To reduce their assessed asset base leading up to new pension rules in 2017. To avoid ‘losing the pension’ pensioners are considering home renovations to enable the provision of an income generating service such as Airbnb. Recent press articles have implied pensioners are ‘hogging’ prime residential space.   So what happens if an age pensioner provides a service such as Airbnb? Currently Centrelink will treat the income as a ‘board and lodging’ category income. In a more traditional ‘board and lodging operation’ the declared income is more easily declared. We understand this is currently understandably being reviewed by Centrelink. So what happens if the income is sporadic? Then it falls into a type of wage/income reporting where fortnightly income reporting is

Age Pension : 20 September 2015 Updates

The tables below set out the revised age pension rates. These will be applicable until 19 March 2016. Our Pension Estimator/Calculator has been updated to reflect these new rates. Age Pension rates increases Couple (each member of couple, per fortnight - including the Energy Supplement) 20 March 2015 20 September 2015 Increase $648.40 $653.50 $5.10 pf Single (each member of couple, per fortnight - including the Energy Supplement) 20 March 2015 20 September 2015 Increase $860.20 $867.00 $6.80 pf Please note that the Centrelink /Human Services site remains

Couple with $53,000 pa in 2017?

Our most popular recent blog entries have been the articles relating to issues on: couple earning $53k pa - $32,718 pa in pension and $20,000 pa wages and other income. how much will I lose in 2017. periodic work and the the work bonus scheme  Age Pension Calculator and the Work Bonus Scheme Our Pension Calculator also includes an estimate of how much age pensioners may gain/lose come Jan 2017 - remembering that these changes are not grandfathered or tapered. So let’s combine all the above and update the situation whereby a home owning couple can have combined earnings of approx. $53,000 pa. Deemed Income  First though we should explain that with respect to deemed income: we are treating the deemed income as an estimate for actual income, as this is the same way that Centrelink does. You may be able to achieve higher rates than those deeming Centrelink rates. Equally you may achieve less. For example Centrelink will assume that you will earn more than $2,00

1 July 2015 Age Pension Deeming Rate Changes

This article summarises both the recent and forecast changes to the age pension, specifically the changes to deeming rates. SUMMARY 1 July 2015 - every July the Government reviews the deeming rates, income and assets thresholds 20 March 2015 - every March and September the Government reviews the pension rates. Our age pension calculator reflects the above changes and forecasts age pension entitlements as at 1 July 2015. 1 July 2017 - a major change in age pension structure is proposed.  Our age pension calculator forecasts a reduction in the age pension that most pensioners can expect. DEEMING RATE CHANGES 1 July 2015 - The deeming thresholds have changed slightly while the deeming rates have remained unchanged, with the ‘upper’ rate of 3.25% still well above cash rates - refer below, for financial investments worth up to $48,600 (for singles - previously $48,000) and up to $80,600 (for couples - previously $79,600), a deeming rate of 1.75% applies. fo

Tapering Grandfathers

The Greens have announced they have struck a deal with the Government and agreed to a reduced age pension for most. Over 4 years the $2.5 billion dollar saving will be the biggest single measure in the 2015 budget. Most commentary has been focused on the impact of the assets test where some pensioners are to lose more than $13,000 pa. What must also be taken into account is that many pensioners may now have an income based assessed pension. You can not asses the impact via the assets test alone. There is a cumulative impact of the changes when the pension operates both on assets and income test to determine which generates the lowest entitlement. There will be far more age pensioners impacted than has been reported. There must be a recognition of what all too many say about the age pension. Those currently applying still remember the days when their wage had a deduction for contributions to the age pension. Many have shown us their pay slips with that deduction.  Now a

The Age Pension Work Bonus Scheme and Periodic Work

Several recent queries have suggested we update our knowledge base on the Work Bonus Scheme (WBS). The WBS provides a facility whereby the first $6,500 of age pensioners 'wages' is exempt from the income test. The WBS can apply to both you and your partner thereby providing a total of $13,000 of exemptions. In a previous blog entry we discussed how a couple on the full pension was ‘earning’ more than $20,000 on top of the full pension. Each were employed on $6,500 pa and had a $250,000  bank account earning a deemed income less than the 'other' income threshold. This is because the WBS is in addition to the the income test threshold allowance of just over $7,000. So a total of more than $20,000 can be exempted from all classes of income test. Now it should be noted the WBS only applies to only certain classes of employment - refer below. What happens if the age pensioner does not earn a consistent wage - i.e. not a steady amount over the year - yet sti

Life Expectancy and the Age Pension

I recently read another article incorrectly suggesting that the “you would be expected to live until 84”. Excuse us for being a little morbid and even pessimistic when we talk about dying. Approximately 22% of Australian males die before they turn age pension age. For women it is approx. 15%. Ref: AIHW age-at-death/ Your life expectancy changes as you get older because as you survive birth, childhood and adolescence, the chance of reaching an older age increases. Life expectancy at different ages can be presented as the number of additional years a person can expect to live, or, their expected age at death in years. For example the life expectancy of men at birth is currently 80.1, at age 45 it is 81.8 and at 65 years old life expectancy is 84.2. Ref : AIHW life-expectancy/#content This is not an average. It not not saying that 50% of males are over the age of - say - 84. It is more like if you were a male and 65

Age Pension Portability

We have again been called in to help an age pensioner who was incorrectly assessed by Centrelink with respect to ‘living’ overseas. Centrelink state that “ from 1 July 2014 new rules will apply regarding the period of Australian working life residence required to receive a full means-tested pension outside Australia after 26 weeks. To continue receiving your full rate of Australian pension you will generally need to have spent 35 years of your working life in Australia. This is an increase from the current requirement to have 25 years of Australian working life residence.” Read more here and “as at June 2012 there were 73,158 recipients of the Australian Age Pension residing overseas.”. Without going into the individual case let’s look at two scenarios Tony moves to Italy and still gets the full pension entitlement. Tony had been living and working in Australia since he was 15. After he retired and claimed the age pension he decided to travel overseas to Italy and liv

So who loses nearly $10,000 pa under the proposed new pension rules?

The Federal Government is tightening the age pension assets test. The Government has estimated that 91,000 pensioners will completely lose their entitlement and a far greater number of age pensioners - nearly 250,000 - will receive significantly less. While a smaller number of age pensioners will receive a modest increase. So let’s have a quick look at how much the majority of pensioners will lose. The following table is a very basic analysis of the implications. The table is for a home owning couple who have the following level of assets. For demonstration purposes we will assume they have no other assessable income or assets. It has been proposed by the Government that the pension asset thresholds - or cut-off-points - are to be adjusted. Age pensioners who have assets of less than $286,500 - the current ‘lower’ threshold - will have unchanged benefits as a result of this change. Age pensioners who have assets of value up to the new threshold - $375,000 -may receive

Full Pension and $53,000 pa

We recently assisted a number of financial advisors on methods to achieve the full pension while still working. To explain the options we will look at the process in small steps and be a bit simplistic. In subsequent post we will expand upon the scenario. Let's say we have a couple - Jack & Jill - who run a small business, are both of age pension age and are paying themselves a small wage. We may have both Jack and Jill paying themselves $6,500 per annum - which is the limit of the Work Bonus Scheme. Hence this combined $13,000 pa is exempt from the income test. Now lets say they have other earnings of $7,000 pa - such as additional income. More typical would be if this income were as a result of deemed income. For example they may have $250,000 in bank accounts - below the assets test - which results in a deemed income of just under $7,000 pa. Again this income is below the income test threshold of approx. $7,400 pa. So they now have a combined income of $20,000 pa - wag