Your money Q&A with Noel Whittaker
Q THIRTY years ago my mother-in-law passed away and left our five children $20,000 each. We invested it in a house for them and were the trustees. All are now adults. When my wife and I applied for the age pension, Centrelink attributed $500,000 to our assets because we said we had been part of a family trust.
The only assets we have are our private home, a car each, furniture and personal belongings. As a result, we only receive $220 each per fortnight. Last year it was disclosed that because I am the appointer for the trust (the person who started it) the assessment for me includes the trust.
For it not to be counted, I need to resign from the trust. I believe this is a relatively new rule started during the past six years. Neither my solicitor or accountant knew of it. So I gather if you start a trust for your children, it’s a good idea to resign before you apply for the pension.
A A DEPARTMENTAL spokesperson says your enquiry relates to the social security trusts and companies rules introduced on January 1, 2002. These rules apply for the income and assets of a private trust and company to be “attributed” to a person who, together with any associates, controls these structures as if the controller owned the income and assets in their own right.
An associate is a person or entity who could be expected to act in accordance with the individual’s wishes. This ensures that income support recipients who control income and assets in private trusts and companies receive similar treatment to income support recipients who receive income and own assets directly.
It is reasonable that people who control significant assets and income in private trusts and private companies should use those assets and income to support themselves before accessing taxpayer-funded social security entitlements.
Under the means test rules in force prior to January 1, 2002, assets and income of private trusts and companies may not have been attributed to a person, even though they may have been the source of the funds and together with any associates, may have had effective control over the assets and income.
This often meant these people were treated more favourably than others with similar assets and income but held directly in their own names.
A person who is attributed with trust income and assets can relinquish all control over the trust. This means they would no longer be attributed with the trust assets or income in the future.
However, the deprivation provisions will apply to the person’s attributed amount from the date of resignation. Under these rules, amounts above $10,000 given away in a single year, or $30,000 over a five-year period, are treated as a “deprived asset”.
Relinquishment of control over the trust would need to be evidenced by an alteration to the trust deed (if feasible) or by creating a separate deed to renounce control of the family trust. This will almost certainly involve consulting with your solicitor and/or accountant about the implications of taking this action.
If you disagree with the decision to attribute them the income and assets of the trust you have the right to have the decision reviewed.
Q MY wife and I have lived in the UK for more than two years. My wife has an age pension; I am 61. We plan to continue living in Europe as all our family is here.
However, we plan to return to Australia for a few months this year to sell our house. Will my wife be subject to the two-year rule if we stay in Australia for four to six months? She has been receiving the pension for three years. We plan to buy a home in a social security agreement country so I can claim my age pension from that country rather than return to Australia.
A AUSTRALIAN residents who are already receiving the age pension prior to travelling or moving overseas to live can continue to receive their pension indefinitely. There are special rules in the social security law for former residents who return to Australia and are successful in claiming the age pension. In these circumstances the person’s age pension is not payable if they go overseas within two years of resuming residence in Australia.
These rules ensure the person is committed to residing in Australia and they have not returned to Australia just to obtain a pension and then return overseas. Australia currently has social security agreements with 30 countries, and Australian citizens who have spent their working life in Australia and now reside in one of these agreement countries can apply for the age pension while in that agreement country.
Anyone planning to travel overseas, temporarily or permanently, should contact Centrelink International Services on 131-673 to discuss any impact their travel plans may have on their current or potential social security entitlements.
- Do you have a question? Send to Q&A, PO Box 130, Wyong NSW 2259 or email edit@thesenior.com.au A selection of questions will be covered in this column. Personal replies are not given.