Chartered accountant GAIL FREEMAN shows a retired couple how to make the most of their assets, free of any Centrelink oversight.

Long and Ha came to see me about their Centrelink pension eligibility.

Ha said the couple was trying to work out how much age pension they were eligible for as they wanted to live comfortably in retirement.

She was already drawing a PSS pension, but Long was waiting until after our meeting to start his pension.

“Let’s start by checking your assets and liabilities,” I said.

“As you know, there are two tests for the Centrelink pension, the income test and the assets test. 

“Centrelink uses the test that gives you the least pension. If you fail either test you get nothing. So it’s important to know what your assets actually are. You own your own city home which is worth about $3 million. You also own a country home worth $500,000. You thought that you might move there. I note you have other assets as well.”

Ha confirmed they were thinking of moving to the country home and renting out the city home, or even buying a different country home. 

“Looking at your situation it seems that Centrelink would apply the assets test to you,” I said.

“As your home is worth about $3 million, have you thought about whether it might be better to sell your home and then use the money for a more comfortable retirement? Because one of the things you said to me was that you were concerned about whether you could live on the Centrelink pension.”

Long said that was exactly the case. 

“We don’t have any children so we don’t need to leave a large estate,” he said. “It would make a lot more sense if we used that money and moved into the country where we would be comfortable. We both come from the country and country living is better for us than city living.”

I replied: “Let’s look at your options. If you take a Centrelink pension it would be about $50 a fortnight between you. Long, your pension is minimal.”

Long said that was because he had taken money out of his superannuation to buy the country house. 

“At that time, we didn’t want a mortgage on it as it was going to be our home,” he said.

I said: “If you sell your city property you will have around $2.8 million. You could then each make a downsizer contribution of $300,000 into a super fund. 

“This would give you some more tax-free super and the balance you can split between you and invest and use some to upgrade your country property. 

“That would give you more disposable income than if you simply rely on getting Centrelink to top up your pensions and get rent from the property. You’re actually using your equity in the property in a way geared to your needs now that you’ve both retired.”

Ha said they were also hoping to be able to travel.

I said: “With this extra income, you certainly could. If you each put $600,000 into super you’re able to draw $15,000 each. This is more than the Centrelink pension. Also you’d have the earnings on the remainder. Depending on the remainder, I would hope that you could earn $50,000 between you and there would be virtually no tax to pay and you’d have more disposable income. That looks a much better option for you both.”

Long said: “I hadn’t realised we could do that. I would feel much more relaxed because then we’ll have plenty of money to live on and we won’t be subject to having to report to Centrelink on a regular basis. This feels much more comfortable. Thank you, Gail.”

If you have any queries about retirement or your pension or strategies you can employ, contact the experts at Gail Freeman & Co on 02 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.