Your Money Q & A with Noel Whittaker
Q MY husband and I are in our 70s, part-pensioners and asset tested. We have no superannuation or annuities. Our savings are in term deposits of which we receive per year $5000 less than estimates based on deeming points. On maturing of term deposits we usually take an interest rate lump sum, which in each case is far less than $10,000. Six years ago we were told by Centrelink that if we taken a lump sum up to $20,000 we do not have to report it, but if we take more we do need to report it and provide evidence on what we have spent that amount on. Is this rule still in place?
A A DEPARTMENT spokesperson said the receipt of interest on a term deposit is not considered a lump sum payment or income, however what you do with it may affect your payment. Pensioners must advise the Department of Human Services of any changes of $2000 or more in their financial assets – if they add this amount to their bank account, they will need to advise the new balance. Similarly, they need to advise the department of any changes of $1000 or more to their combined assessable assets – that is, non-financial assets. This includes (but not limited to) the value of goods, cars, boats, furniture, real estate (including real estate in other countries), personal property, interest in any property, trust or company, and any other right or interest in any other asset (including assets in other countries). If a pensioner reduces their financial assets by a large amount without buying an asset, the department may ask for details and some form of supporting documentation. This allows the department to investigate if deprivation and/or gifting has occurred. The gifting rules are designed to stop people giving money away from their assets to gain a higher rate of payment.
Q THERE is still no change to the deeming rate, which is set by Centrelink at 1.75 per cent up to a certain amount depending on whether you are single, a member of a couple, or not on a pension, and 3.25 per cent over that amount. It doesn’t seem fair that so many people with money invested in banks can’t get anywhere near these rates on their money. So we can be deemed to be earning much more than we actually get. Can you explain deeming, and what it would take for the government to change the current rates.
A THE purpose of the deeming rates is to encourage pensioners get the best return on the money possible. Given that rates may well rise in the next two years, you can bet deeming rates will rise as well. I suggest you talk to a good advisor, and consider a balanced portfolio which will include some shares. Including franking, you may well get over 7 per cent per annum.
Q SHOULD I pay tax on my single age pension? My only income is the age pension. I don’t own a home and have $5000 in my bank account.
A IF your only income is the age pension there would be no income tax to pay.
- 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.
