Getting your fair slice of the Centrelink pie

WHEN assessing entitlement for benefits, Centrelink uses the assets and income tests. But for some payments another test is used, based on the disposable cash an individual or a couple has.

By InvestSMART · 26 Aug 2011

By InvestSMART ·
26 Aug 2011

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WHEN assessing entitlement for benefits, Centrelink uses the assets and income tests. But for some payments another test is used, based on the disposable cash an individual or a couple has.

QI am 66 and my husband is 64. My husband finished an overseas contract in December and is unemployed. Our assets are our home, SMSF shares of $344,000, car at cost $25,500, furniture at cost $30,000, totalling $399,500. Our liquid assets are now below $3000, with the dividends receivable by the SMSF for the next 12 months estimated at $14,463.

This dividend value has been taken up by Centrelink as our combined annual income. My husband has been told to apply for Newstart and after four interviews he has been told we have too many assets. I have been granted a part pension of $403.33 a fortnight plus $44 supplement. Have we been assessed correctly?

AIt would appear you have not been assessed correctly. When it comes to Newstart, in addition to the assets and income test, when the payment is received will depend on the value of your liquid assets. Liquid assets are cash, amounts in bank accounts, and also include:

Shares and debentures.

Term deposits.

Ten-year insurance bonds.

Amounts deposited or lent to banks or other financial institutions, whether or not the amount can be withdrawn or repaid immediately.

Amounts borrowed from the bank for a specific purpose such as international travel that may not have been used for another purpose.

Gifts to a son or daughter in some circumstances.

Loans to other people.

Any money in trust funds, bank accounts, including mortgage offset accounts, but not balances of mortgage redraw accounts.

Redundancies or eligible termination payments that are not rolled over or cannot be rolled over.

If a person's liquid assets exceed $3000, and a couple's $6000, a waiting period of one to 13 weeks can be imposed. It would appear your only liquid asset is $3000. The shares in your self-managed super fund should not be counted as a liquid asset.

The total value of your superannuation fund, because you are of age pension age, is, however, counted as an asset and also affects the amount counted as income. This is because when a super fund is still in accumulation stage a deeming rate is applied to it.

You should think about starting a pension at the lowest rate. When the purchase price of the pension is deducted, the amount counted as income should be less than is counted under the deeming rules.

QMy wife receives a disability pension and I get a carer payment. A term deposit has just matured and I have put it into super. Will this change my assets by deducting the contribution into super from my assets and therefore increasing our pensions? We have not reached pension age.

AAs you are both under pension age and not receiving a pension from the super fund, the amount in super should not be classed as an asset by Centrelink and your benefits should increase.

Questions can be emailed to super@taxbiz.com.au

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Frequently Asked Questions about this Article…

What tests does Centrelink use to assess my entitlement to payments?

Centrelink uses the assets test and the income test to assess most payments. For some payments (for example Newstart), Centrelink also applies a liquid assets test that looks at the disposable cash you or a couple have and can affect the timing of a payment.

What exactly counts as ‘liquid assets’ for Centrelink assessments?

Liquid assets include cash and amounts in bank accounts plus specific items such as shares and debentures, term deposits, ten‑year insurance bonds, amounts deposited or lent to banks or other financial institutions, amounts borrowed for a specific purpose (like international travel), gifts to a son or daughter in some circumstances, loans to other people, money in trust funds or mortgage offset accounts (but not mortgage redraw balances), and redundancies or eligible termination payments that aren’t rolled over.

How do liquid asset thresholds and waiting periods for Newstart work?

If a single person’s liquid assets exceed $3,000 or a couple’s exceed $6,000, Centrelink can impose a waiting period of between 1 and 13 weeks before Newstart is paid. If your assessed liquid assets are below those thresholds, a waiting period should not apply.

Are shares held inside a self‑managed super fund (SMSF) treated as liquid assets by Centrelink?

No — shares held inside your SMSF should not be counted as a liquid asset for the liquid assets test. However, the total value of your superannuation fund is still counted as an asset (and can affect income treatment) depending on your age and whether the fund is in accumulation or pension phase.

How does my superannuation balance affect Centrelink’s income assessment?

If your super fund is still in the accumulation stage, Centrelink applies deeming rules to the total value of the fund when you are of age‑pension age, so the super balance is counted as an asset and influences the amount counted as income. Converting super to an account‑based pension changes how Centrelink treats the amount and income.

Can starting an account‑based pension reduce the income Centrelink counts for my super?

Yes. Starting a pension (for example at the lowest permissible rate) means the purchase price of the pension is deducted from your assets and, typically, the amount counted as income should be less than the amount that would be counted under deeming rules on an accumulation balance.

If I’m under pension age and I put a matured term deposit into super, will Centrelink count it as an asset?

For people under pension age who are not receiving a pension from their super fund, Centrelink generally should not class amounts held inside super as an assessable asset. In that situation moving a term deposit into super can result in Centrelink treating it as non‑assessable and may increase your other benefits.

Why did Centrelink count SMSF dividends as my combined annual income, and is that correct?

In the example in the article Centrelink took estimated dividends receivable by the SMSF as combined annual income. Treatment can vary depending on whether the super is in accumulation or pension phase and how income is derived; if you believe dividends have been incorrectly assessed you can review the treatment and consider options (such as commencing a pension) that change how Centrelink counts super income.