There’s a change in legislation affecting Pensioners…
May 1, 2013
The Value of Advice
November 4, 2015
So, What is "deeming'??
October 16, 2014
Deeming is a method of determining income on financial investments held by applicants or recipients of Government Income Support payments and people seeking assisted residential aged care. It does not impact on the Assets Test. Financial investments include, among other things, all bank, building society and credit union accounts, cash, shares, managed investments, money lent, friendly society and life insurance bonds regardless of the date purchased. Deeming is a tiered interest rate system that applies to the total market value of financial investments held. For couples it is usually their combined financial investments but can depend on whether the support payment is a pension or an allowance. The rates are reviewed regularly and may be increased or reduced. The Federal Government sets (or 'deems') interest rates for pensioners. If you are a pensioner, when the government assesses your income it assumes that a 'deemed' rate of interest is being earned, regardless of what is actually being earned on investments.How does ‘deeming’ work?When Social Security assesses your eligibility for support payments, they assess you under the Assets Test and the Income Test, both of which you must satisfy before you can receive any benefits. Under the Income Test, instead of asking you to declare how much income you are actually earning from your financial investments, Social Security ‘deems’ that you are earning a certain percentage based on the level of assets you have. The current deeming rates (effective 1 July 2014) are:
2%p.a. on investments up to $48,000 for a single (up to $79,600 for a pensioner couple)
3.5%p.a. on investments over $48,000 for a single (over $79,600 for a pensioner couple).
For example, if you commence your account based pension after 1 January 2015, are single and have an account balance of $300,000 you would be deemed to earn $9,780 p.a. for the purpose of the Social Security Income Test (assuming no other financial investments, based on current deeming rates and thresholds). What does this new ‘deeming rule’ change mean for you?If you have an account based pension opened before 1 January 2015, your account will not be subject to deeming if:
You receive Social Security income support payments immediately before 1 January 2015, and
You continue to receive Social Security income support payments from 1 January 2015.
However, the new rules may affect you if you don’t meet either of these requirements, or if you move your balance to a new pension account from 1 January 2015. If you haven’t yet opened an account based pension, and you are currently eligible to do so (e.g. if you are aged 55 or over), there may be benefits in starting an account based pension and applying for Social Security income support payments (where eligible) before 1 January 2015. Even if you don’t think you’re eligible for Social Security benefits, you may still be better off commencing an account based pension sooner, as investment income generated in an account based pension account is exempt from tax.Act now to ensure you don’t miss outIf you are receiving a Social Security income support payment, or may be eligible to receive one, it’s a good idea to review your circumstances now to ensure that you are best placed before the new deeming rules come into effect on 1 January 2015. Now is the time to review your superannuation and pension arrangements to ensure you don’t miss out on valuable Social Security entitlements. Why not schedule a meeting with your Matrix Financial Adviser now?The advice is general in nature only and does not take into consideration your financial situation, goals or needs. Before making any investment product decision you should obtain a copy of the product disclosure statement. Please seek advice prior to acting on this information.