Centrelink. Income & Asset. Strategies

Transcription

1 Centrelink Income & Asset Strategies

2 192 Phil Watson Digital Marketing Coordinator Christian Super

3 Questions? Questions? Desktop Tablet or phone If you have questions during the webinar... Please use the Chat/ Question section on the panel on the right hand side of your screen. I ll answer your question where it relates to the current topic or defer it to the end of the presentation if that works better.

4 Disclaimer Gavin Martin and Cornerstone Wealth are Authorised Representatives of Lonsdale Financial Group Ltd ABN AFSL The content of this presentation is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this presentation, you should assess your own circumstances or seek advice from a financial planner and seek tax advice from a registered tax agent. Information is current at the date of issue and may change.

5 What s the process? Your Preparation 'Discovery' meeting Strategy Presentation Implementation of your financial life strategy Ongoing Monitoring and Review What s involved? How long does each meeting take? Complete a questionnaire prior to our first meeting. Discover together your financial life values, goals and objectives and the probability of achieving them. We work with you to agree what actions to take to achieve your goals and objectives. We work with you and your other professional advisers to implement your financial life plan. 30 minutes minutes 60 minutes 60 minutes Review of your investment portfolio and financial life plan. What s the duration between meetings? 1 week from the initial contact to the discovery meeting 2-3 weeks from the discovery meeting to the strategy presentation 6-8 weeks from strategy presentation to completion of implementation 6 12 months from completion of implementation to the annual review

6 What is Age Pension Age? Qualifying ages for Women Qualifying ages for both Men & Women Possible Qualifying Birth Date Age 1 Jul Dec ½ 1 Jan Jun Men born prior to 1 Jul Jul Dec ½ 1 Jan Jun Jul Dec ½ From 1 Jan Jul Dec ½ 1 Jan Jun Jul Dec ½

7 Maximum Rates (rates from 20th Sept 2017) $ pf ($23,254 pa) $ pf each ($17,529 pa each) Includes Base Pension, Pension Supplement and Energy Supplement

8 Pension Rate Paid $23,254 Potential Maximum $35,058 Rate using Income Test Rate using Asset Test The applicable test may change as your circumstances change Lower Rate Applies

9 What happens when only one member of a couple is Age Pension age? Same income and assets test applies Maximum rate of $ pf ($17,529 p.a.) if assessed income is below $300 pf ($7,800 pa) Eligible person's rate reduces by 25c for every $1 of income above the free area No pension paid if combined income is above $2,996 pf ($77,917 pa)

10 Income includes... Gross earnings from employment Including salary sacrificed income Less the Work Bonus" if applicable Employment income of $6,500 plus other income of $300 pf ($7,800 p.a.) could be earned before the pension is affected Overseas income Income streams and superannuation pensions Rent from real estate Farm or business income Deemed income on financial investments

11 Assets include Motor vehicles, boats, caravans etc Household contents and personal effects Bank accounts, investments, loans Real estate (net value) Farms, businesses (net value) Antiques, collectables Gifting

12 Assets DO NOT include... Principal home and surrounding land on same title Accommodation bond paid for aged care Funeral bonds, prepaid funerals Special disability trusts Superannuation/rollover investment up until Age Pension age

13 Example: Sam & Sally How can we maximise Sam s pension? Sam & Sally 65.5 & 57 years Married House $800,000 Not Asset Tested Cash $30,000 s $600,000 Cash $30,000 Shares $100,000 Total Assessable assets $730,000 Lower asset threshold $380,500 Assets over the threshold $349,500 Taper rate $3 per $1,000 $1, Maximum pension $1, Couples fortnightly Pension $ Only Sam eligible $ $600,000 Shares $100,000

14 Move funds to super? $440,000 Sam s $160,000 $100,000 Shares $30,000 Bank Account Christian Super

15 Move funds to super? $200,000 $240,000 Sam s $160,000 $100,000 Shares $30,000 Bank Account Christian Super

16 Move funds to super? $300,000 $240,000 Sam s Shares $30,000 Bank Account $160,000 Christian Super

17 Move funds to super? $460,000 $240,000 Sam s Shares $30,000 Bank Account Christian Super

18 Example: Sam & Sally How can we maximise Sam s pension? Sam & Sally 65.5 & 57 years Married House $800,000 Not Asset Tested Cash $30,000 s $240,000 Cash $30,000 Shares $0 Total Assessable assets $270,000 Lower asset threshold $380,500 Assets over the threshold $0 Taper rate $3 per $1,000 $0 Maximum pension $1, Couples fortnightly Pension $1, Only Sam eligible $ Sam s Pension $240,000 Super $460,000 Not Asset Tested Increased pension $ pf $13,630 p.a. Benefit over 10 years approx $136,300

19 Sources of income $17,529 Sam $12,000 Sub Total $29,529 $460,000 $240,000 Sam s Shares $30,000 Bank Account Christian Super

20 Sources of income $17,529 Sam $12,000 Sub Total $29,529 $20,000 $440,000 $240,000 Sam s Shares $10,000 Bank Account Christian Super

21 Sources of income $17,529 Sam $12,000 Sub Total $29,529 Christian Super Sally $20,000 Total $49,529 $440,000 $240,000 Sam s Shares $30,000 Bank Account Christian Super

22 Sources of income $20,000 $420,000 $240,000 Sam s Shares $10,000 Bank Account Christian Super

23 Roll back to pension phase $420,000 $240,000 Sam s Shares $10,000 Bank Account Christian Super

24 Roll back to pension phase $20,000 $400,000 $240,000 Sam s Shares $10,000 Bank Account Christian Super

25 Roll back to pension phase $400,000 $240,000 Sam s Shares $30,000 Bank Account Christian Super

26 Strategy Considerations There is some complexity in the decision Access to the funds if younger spouse still working Cash flow - need to make regular draw downs from super Tax within the accumulation phase of super reduces the benefit (e.g. $460,000 x 5% earnings x 15% tax $3,450) Assets test threshold is $380,500 Financial asset threshold for Income Test under deeming rules is currently $278,492 Capital Gains Tax on share sales Contribution limits $300,000 (Government co-contribution) Cash out re-contribution

27 Age pension and the death of a spouse Planning ahead can assist your broader family Change from Couple to Single tests Can result in nil/reduced Age Pension Loss of Health Care Card

28 Example: Joe & Mary How does the death of Joe impact Mary? Joe & Mary 77 & 68 years Married House $600,000 Not Asset Tested Joe $200,000 Mary $350,000 Cash $30,000 Total Assessable assets $580,000 Lower asset threshold $380,500 Assets over the threshold $199,500 Taper rate $3 per $1,000 $ Maximum pension $1, Couples fortnightly Pension $ Account $30,000 Couple Single $200,000 $350,000 $30,000 $580,000 $253,750 $326,250 $ $ Nil BDN to kids $0 $350,000 $30,000 $380,000 $253,750 $126,250 $ $ $ s $550,000 Larger BDN to kids $0 $200,000 $30,000 $230,000 $253,750 Nil Nil $ $ But income test reduces pension to $842.74

29 Strategy Considerations It is hard to predict future needs Pension of $ pf or $13, p.a. Pension of $ pf or $21, p.a. Health Care Card benefits Do you have sufficient funds to live on? Taxable components with the super account could incur 17% death benefits tax in passed to financial non-dependent Accommodation bond for Aged Care Changes to the Income and Assets test

30 Age Pension - Asset Test Thresholds Lower threshold (full pension) Cut-off threshold (no pension payable) Single homeowner $253,750 $552,000 Single non- homeowner $456,750 $755,000 Couple homeowner $380,500 $830,000 Couple non- homeowner $583,500 $1,033,000 Clients who lost their pensions due to the reduction in cut-off thresholds will have lost access to the Pension Concession Card, should have automatically received a Commonwealth Health Seniors Card (CSHC) but should receive the Pension Concession Card October 2017 to receive pharmaceutical concessions.

31 Asset Test Reduction Strategies Be sure to weigh the pros of cons of your options Update your assets listed with Centrelink (e.g. cars) Spend money (house improvements, holidays) Gift money ($10,000 / year or $30,000 over 5 years) Super for spouse less than Age Pension age Funeral bond / prepaid funeral expenses Annuity with < 100% Residual Capital Value

32 What is an Annuity? There are various types and conditions Source of income for a defined period Regular income not subject to market movements. Can complement both the Age Pension and other investments like an account-based pension. Can have some social security benefits Two type of annuities: Term annuities Lifetime annuities

33 How do Annuities reduce assets tested? Provided by Challenger

34 Example Joe and Tina Boosting the age pension Joe (aged 67) and Sarah (aged 67) are a couple and own their home They have $250,000 each in account-based pensions drawing the minimum payment Their investor risk profile is 50% defensive and 50% growth They have $20,000 in personal assets and $50,000 in cash They are entitled to a combined Age Pension of $20,277 p.a. (20th September 2017 rate) under the Assets Test Income requirement of $60,000 p.a.

35 Example Joe and Tina Life time annuity option $75,000 each in Challenger lifetime annuities gives them $8,392 in total; $175,000 each in account-based pensions gives them $29,330 in total; $20,277 from the Age Pension.

36 Example Joe and Tina Provided by Challenger

37 Example Joe and Tina Provided by Challenger

38 Annuity considerations Weigh up the pros and cons Limitation of what you can take out as a lump sum Locking in a fixed level of return Over the long term, an annuity might pay less than a market linked investment Increase in interest rates can reduce the withdrawal value

39 Centrelink Age Pension Changes 1st Jan 2015 Deeming of Account Based Pensions 1st Jan 2016 Maximum 10% of Defined Benefit Pensions not assessable 1st Jan 2017 Asset Test Changes

40 Before making changes to pension Deeming can negatively impact your situation Review the impact of changes to your pension including: Rollover Reboot - combining with another super account Withdrawal / closure Age Pensioners and Commonwealth Seniors Health Care Card Drawing more than the minimum pension - might be worth rebooting your account based pension

41 Further Resources Cornerstone Wealth Retirement Planning webinar at Webinar recording will be ed to you Next webinar is Centrelink Income and Asset Strategies 23 October 2017 Personal Financial Advice Lodge an enquiry via and we will contact you Call (1300 ASK GAV) to book an initial consultation Christian Super Help Desk or Centerlink Department of Human Services Senior Australian s number Financial Information Services Officer Rate Estimator Express Plus Seniors app - search Centrelink on your smart phone app store

42 Questions Christine Can we use my super to pay off the mortgage and I still get the pension when I retire. My husband is only on a basic wage. Norm Do I have enough super to retire on? Marian How do we help our children? How could they help us? (and yes, we do trust them :-) ) Sally Natalie Jan Is a transition to retirement pension after age 60 (and under age 60) considered income when assessing family tax benefits? We have a very small amount of super and own our home. If we downsize and make a profit should we do it before pension age? What is the limit transferring super to the younger spouse? Will it be taxed if I withdraw money from my super, before I retire? Maria What is the maximum amount you can earn on the age pension before the benefits cutout Ken Whether to purchase an investment home that will be my residence once I retire or invest the funds in another way.

43 Centrelink Income & Asset Strategies