SOCIAL SECURITY – AGE PENSION PENSION AGE ELIGIBILITYDate of birthPension Age EligibilityDate of Age Pension age change1 January 1954 to 30 June 1955661-Jul-191 July 1955 to 31 December66 ½1-Jul-2119561 January 1957 and later671-Jul-23 Assets Test (as of 30th Jan 2021)StatusLower Limit (FullPension)Partial PensionUpper Limit (NoPension)If total assets:up tobetweenfromSingle:Homeowner$268,000$268,000- $583,000$583,000Non-Homeowner$482,500$482,500- $797,500$797,500Couple (combined), either partner eligible:Homeowner$401,500$401,500- $863,500$876,500Non-homeowner$616,000$616,000- $1,091,000$1,091,000 Reduction factor: $3/fortnight for every $1,000 worth of assets above Lower Limit to Upper Limit Income Test (fortnightly) (as of 30th Jan 2021)StatusFull PensionPartial PensionNo PensionIf total Fortnightlyup tobetweenfromincome:Single$178$178- $2,066.60$2,066.60Couple (combined)$316$316 – $3,163.20$3,163.20 Reduction factor: Single – 50 cents for each dollar above $178Couple (combined) – 50 cents for each dollar above $316 Deeming Rates (as of 30th Jan 2021)StatusAmountDeemed RateAmountDeemed RateSingleUp to $53,000.25%Over $53,0002.25%CoupleUp to $88,000.25%Over $88,0002.25% Basic Pension Rates (fortnightly) (as of 30th Jan 2021)Single$860.60Couple$648.70 each partner (or $1297.40 if both partners eligible)+ Pension Supplement (fortnightly) (as of 30th Jan 2021)StatusFull PensionPartial PensionSingle$69.60$37.40Couple$52.50 each partner ($105 combined)$28.20 each partner ($56.40 combined)+ Energy Supplement (fortnightly) (as of 30th Jan 2021)Single: $14.10Couple (each partner): $10.60Couple (combined): $21.20 Question 1 – Please refer to the Centrelink Guide in Canvas and lecture notes.Always refer to the following factors in order of preference:1- Their Age- Can they receive an Age Pension or Newstart2- Do they meet the residency test?3- Asset their overall income and asset level4- Determine if the income and asset levels are within the upper and lower thresholds.a) Entitled to partial pension because assets and income above threshold.b) No entitlement to age pension as below pensionable age of 66 years.c) No entitlement to age pension as has not met residency requirements (Australian resident >10 years)d) Entitled to a part pension (Assets above lower and below upper thresholds of asset test and incomeabove lower and below upper thresholds of income test)Question 2 (a)Mr and Ms Moon-Couple are first homeowner and have total assets of $500,500 As assets are above the lower limit for a couple homeowner, they are entitled to a Part pension.Reduction factor will be $500,500 – $401,500 = $99,000/1,000 x $3 = $297.00 Pension= $ 1,297.4- $297.00= $ 1,000.40Supplements: = $56.40 + $21.20 = $ 77.60= $ 1,078.00 per fortnight(b)Mr Travis – He is Single & non-homeowner with assets of $150,000This is below assets lower limit for a non-homeowner so he is entitled to full pension.i.e. $860.60+ $69.60+ $14.10= $933.4(Lower limit is $482,500 at end of Jan 2021)(c) Ms Cooney– Ms Cooney is Single and a homeowner with other assets of $350,000Reduction factor will be $350,000 –$268,000= $82,000/1,000 x $3 = $246.00(Pension entitlement) – (Full pension less reduction factor:(Pension = $860.6- $246.00= $614.6) + ($69.60+ 14.10) = $698.3 per fortnightShe is entitled to a part pension of $698.3 per fortnightQuestion 3Refer to Deeming rates. Rates will be provided in exam.Deeming Rates Deeming Rates (as of 30th Jan 2021)StatusAmountDeemed RateAmountDeemed RateSingleUp to $53,000.25%Over $53,0002.25%CoupleUp to $88,000.25%Over $88,0002.25% Ms GreenFinancial investments:-Credit union $25,000-Bank account $30,000-Shares $10,000Total $65,000(a) Deemed income: $53,000 x .25% = $132.5Balance ($112,000) x 3% = $270.00Total = $402.50 p.a. (b)Actual income earned-Credit union $25,000 x 4%=-Bank account $30,000 x 1.5%=$1,000$ 450$1,500$2,950 p.a.-Shares$10,000 x 15%=Total Centrelink will only count the $402.50 not the actual $2,950 earned with the investments. Thishighlights the strategy that client are better of investing in higher returning assets. This will also be basedon client’s risk profile. Under current low interest rate environment low risk investor may find riskier assetssuch as blue-chip shares more attractive as they may pay a good dividend yield.——————————————————————————————————————————-Question 4 (a)Age pension incomes testFamily homeExempt assetCarsExempt assetHouse contentsShares in TelstraTerm depositRental propertyManaged investmentsExempt assetFinancial investmentFinancial investmentNon-financial investmentFinancial investment (b) Income for social security purposesActual income- Ignore actual income from dividends, interest and managed fund distributions.Rental property income $ 14,000Assets subject to deeming:-shares in Telstra $25,000-term deposit $20,000-managed investment $50,000Total $95,000First $88,000 assessed at .25 % = $ 220.00Excess over $88,000 assessed at 2.25 = $ 157.50Deemed Total $377.5Total Combined Income $14,377.50 p.a(c) Eligibility to the age pension is based on an assessment to both the assets and income testwhichever gives the lower paymentNotes : Use the Home Owner ratesAssets test,Assessable assets total $330,000 (excluding family home =$ 30,000 + 65,000 + $25,000 + $20,000 +$140,000 + $50,000)Pension equal to full pension because assets are below the $401,500.00.Pension is $1297.40 + $105 + $21.20= $1423.6Incomes test Total income as assessed in (b) aboveFortnightly income isPension equal to full pension ($1, 297.40)Reduction amount $552.98 – $316.00 = $236.98 x 0.5Pension equals $1,297.40 less $118.49$14,377.50 p.a$552.98 p.f.= $118.49= $1,178.91Pension supplement and Energy Supplement: 56.40 + $21.20 =$77.60$1,256.51 Will be entitled to Age pension as determined under the Income Test as it provides for the lowestpayment i.e. $1,251.51 per fortnight.Question 5Notes: Use the Home Owner ratesEntitlement under the Asset test AssetsValue $Saving account$100,000.00Share Portfolio$102,000.00Term deposit$200,000.00Car$22,000.00Content$28,000.00Managed Investment$103,000.00Total assessable assets$555,000.00Lower Limit (Full Pension)$401,500.00($415,000 – $401,500)$153,500.00Reduction factor ($13,000/1,000 x $3 )$460.50Basic Pension Rates$1,297.40Basic Pension$836.90Pension Supplement$56.40Energy Supplement$21.20Per Fortnight part pension$914.50 Incomes test entitlements Financial investments AssetsValue $Deemed incomeSavings account$100,000.00Share Portfolio$102,000.00Term Deposit$200,000.00Managed Fund$103,000.00Total$505,000.00First $88,000 @ .25%$220.00Over $88,000 @ 2.25%$9,382.50Total income p.a.$9,602.50Income per fortnight $6,452.5/26$369.33 Full Pension (couple)Pension equal to full pension$316.00Reduction factor: (369.33 – 316)/.50 cents$26.66Basic Pension Rates$1,297.40Basic Pension ($1,297.40-$118.49)$1,270.74Pension Supplement56.4Energy Supplement$21.20Per Fortnight part pension$1,348.34 They will be entitled to Age pension as determined under the Assets Test as it provides for the lowestpayment i.e. $914.50 per fortnight when compared to the income test entitlement of $1,348.34Question 6Strategies that could be put in place to minimise the assets and income of a person for Age Pensionentitlements:1. funds from a deceased spouse to be left to children and/or grandchildren, if any, through atestamentary trust arrangement: assets and income not counted if remaining spouse has nocontrol over trust assets2. where spouse below pensionable age, transfer funds into spouse’s superannuation fund:superannuation not counted where person is below pensionable age3. gifting up to $10,000 per year4. Spend money on personal lifestyle assets such as renovations and holidays5. Invest in a Pre Paid Funeral Bond6. Insure personal assets are valued correctly.
