The Australian Government has provided a stimulus package amongst other financial assistance to counter the impact on the economy and the wellbeing of Australians due to Covid-19 virus.
What has not been publicised, is how current asset test assessment thresholds can increase pension payments or results in those not qualifying for age pension assistance, may now do so, because of the fall in the value of their investments.
Centrelink do not automatically adjust the assets of part-pensioners. Pensioners need to register on mygov to do so themselves, or notify Centrelink the change of circumstances.
The age and disability asset test taper, means that for every $10,000 reduction in assessed assets for a part-pension recipient, there is an increase of $30 per fortnight pension. This is the equivalent of 7.8%pa return on that asset by virtue of the enhanced pension payment.
Updating assets and receiving an increase in pension payments, then provides the opportunity to reduce or suspend what is being drawn from superannuation or investments drawings, while the share market is in such turmoil.
This reduces the impact of drawing down investment units when their value is discounted from what ought to be fair value.
Other considerations are using bank cash or cash deposits in the investments for a period by suspending draw down on growth assets until the market recovers.
The following link provides details of the asset limits.
Assessed assets generally includes everything except the family home.
The exceptions include, certain income streams, asset discounts on annuities, and funeral bonds.
The use of annuities for a pensioner affected by the asset test or a person close to meeting the asset test cut-off can be effective as 40% of the purchase price is exempt with a further reduction at age 84 ( provided in force for 5 years) down to 30% of the original purchase price.
I don’t have a crystal ball because if I did, I would have had all clients invested in cash from the beginning of February, but we can take some lessons from history, where events such a war, depression, recessions, global financial crisis, all had an impact on investment markets when they occurred, but as those events became a mark in history, so did the previous lows of investment markets, as time healed.
The following tables, sets out the qualifying limits:
From 1 July 2019, pensions reduce when your assets are more the limit for your situation.
|A couple, combined||$394,500||$605,000|
|A couple, separated due to illness, combined||$394,500||$605,000|
|A couple, 1 partner eligible, combined||$394,500||$605,000|
From 20 September 2019, part pensions cancel when your assets are more the limit for your situation. Your limits are higher if you get rent assistance with your pension.
|A couple, combined||$863,500||$1,074,000|
|A couple, separated due to illness, combined||$1,017,000||$1,227,500|
|A couple, 1 partner eligible, combined||$863,500||$1,074,000|
(slight differences apply for transition rate pensions)