Strategies for maximising entitlements
THE eligibility rules for Centrelink benefits are continually being tightened but there are still avenues to increase your entitlements if you seek good advice.
One of the simplest strategies is to spend money improving your home, or going on a holiday. The value of the family home and any adjacent private land of up to two hectares are exempt from the assets test, therefore spending on items such as renovations or repairs enables you to improve the asset, enjoy a better lifestyle and at the same time boost your benefits.
It is common for people to take a holiday when they retire but in some situations it may be worthwhile to take it earlier, or at least prepay it.
These strategies may be particularly effective if a spouse has died and the survivor moves from the couple assets test to the single assets test. Suppose a couple had assessable assets of $650,000 - well below the maximum allowed under the assets test as a couple. Unfortunately the cut off point for the single pensioner assets test is $626,000, so the surviving partner would lose their pension, and most of the fringe benefits, on the death of their loved one. By spending $70,000 on renovations and travel, the assessable assets are reduced to $580,000 and a part pension is retained.
It is also a useful strategy for a person who is trying to receive the Newstart allowance. Suppose a person aged 53 had total assessable assets of $200,000 including cash and managed funds of $180,000. No Newstart would be payable because the cut off point is $178,000 for a single. Spending $25,000 on the home and on travel would reduce assessable assets to below the threshold and so Newstart would be payable as long as the applicant had passed the income test.
Question: I am 63 and self employed doing casual jobs around the neighbourhood. My taxable income for this financial year will be $4700 which is under the taxable threshold. Will I be eligible for the $1000 government super co-contribution if I contribute $1000 from my earnings?
Answer: You appear to be eligible for the co-contribution because on the information supplied you are self employed.
Question: I am 81 and my wife is 78. Our wills stipulates that if one of us should die $50,000 goes to our daughter, $50,000 goes to our son, and the remainder to the surviving partner. Is there any tax payable on these amounts? We are both aged pensioners.
Answer: If the amount bequeathed is in cash there would be no tax payable by the beneficiaries but if money was left to them in the form of assets such as shares there could be capital gains tax to pay if these assets carried a capital gains tax liability and they sold them. However, in that case, there would be no CGT triggered until the assets were actually disposed of. May I congratulate you on clever estate planning, because too many pensioners in your situation leave all their assets to each other and find themselves with a severe reduction in their pension when one spouse dies and the remaining spouse is assessed under the single assets and income test.
Question: I was wondering if you have heard of any proposals by the Government to tamper with the current negative gearing rules, particularly in relation to claiming rental expenses against income.
Answer: For as long as I have been writing columns in this newspaper there have been rumours that the government is going to change the negative gearing rules. Obviously this matter is likely to be addressed in the Henry review of taxation but I would be most surprised if any major changes occur. Remember, it was tried once and was quickly repealed.
Noel Whittaker is a director of Whittaker Macnaught Pty Ltd. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. His email is email@example.com.