financial advice

Hi Brenny,

Who has told your Dad that he is now over the assets level?

I recommend an appointment with one of their advisors and you go along too so thatyou can look at things from a slightly different angle.

How much over the assets test level is your father? How is this determined? Are the figures accurate for the area? Is the pension amount lost significant? Or is your Dad better off ditching the pension? – I suspect not based on your comments.

Some other random and incoherent thoughts.

What about reverse mortgages through Commonwealth Bank? Are these an option?
Sell the duplex to you and gift you an allowable sum of money to reduce his asset base.
Sell the property and buy some cheaper property, (but under the asset level) and such that it is returning similar or better income levels.

Derek
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Property Investment Support Available. Ongoing and never stopping. PM welcome.

Hi Brenny.
Your father is not alone. I see people in that predicament every day, either with one rental property or a holiday place down the coast.

The pension in Australia is not the result of a contribution like it is in Europe and so it must be asset and income tested. The test used is the one that allows to pay the least amount of pension, In your case it seems that the asset test will be applied.

For every $1000 dollars that the asset goes over the limit (and from memory it is 212k for couple and 160 for single but please check yourself) the pension reduces $3, so if the duplex is about $300k no more pension.

Asset reduction strategies (how I hate such terms) are only a few. Many people I see are so determined to “get the pension” that burn their assets in overseas holiday trips. Some pretend to spend the money claiming long trips and heavy losses at the casino, but this is risky since it can be disallowed if it is not credible. Gifting is limited to $30k in 5 years, maximum 10k per year and 2 years nothing at all. Selling the property to purchase a complying allocated pension may see some of the complying portion of the pension exempted from the asset test. Yet this “complying” products are rather crappy because they are paid for the life of the person but the bank keeps it after the person passes away.
Some better and more sensible ways for your dad are, to sell both properties, his own and the duplex and purchase a nice big mansion at the harbour. No worries, full pension and you have a nice asset in the family that will not go to the sharks.
Another way is (if you don’t have your own home) for him to purchase a house for both of you but only on your name, and he will be purchasing a life long right to use the house and stay with you. The house can be divided in two, have a granny flat for him or whatever arrangement you like. This is called the granny flat rule. It is a bit more complicated in so far that he cannot buy the right to live in a granny flat in Cabramatta for 2 million dollars, so there are formulas to see if it is reasonable to pay what he is paying.

Personally, I suggest to people to sell 2 properties and buy a nice new one in the place of their dream (if they have reasonable dreams) This way there is no need to cheat nor to pretend losses and take fanny risks.

He also does not need to spend all the money, aprosimately $70,000 dollars in the bank and applying the deeming interest rate will be under the income test and clearly under the assett test as well. 100 or even 160,ooo will cut some pension off but will compensate with income from the bank. See the deeming rules on the Centrelink web page, it goes aproximatley like this: the first 30,000 dollars are deemed to earn 2% and the rest 4% (check figures for accuracy).

As for who to approach in Centrelink, ask for an appointment with the Financial Information Service Officer, FISO, they are usually knowledgeable and helpful.
Hope this helps.

May God bless you
and prosper you.
Marc