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10 little-known pension traps prove the value of advice

The age pension is a major source of income for the majority of Australian retirees. A bonus is that eligibility for a part pension gives them access to most of the pension’s fringe benefits, including the prized Pensioner Concession Card, even if their age pension is only minuscule.

But the system is complex, and many people find it hard to work their way through the labyrinth of regulations. As a result, they may fail to qualify for a pension, lose their pension, or receive less than they would if they took advice.

Eligibility is tested under both an income and an assets test, and the one that produces the least pension is the one used. There is an age pension calculator and a deeming calculator on my website.

1. Additional income

Most wealthier pensioners are asset tested, yet I keep receiving emails from them asking if it’s okay to earn some more money. Of course it is – the income test is not relevant if you are asset tested. A couple with assets of $800,000, receiving a pension of $136.80 a fortnight each, could have assessable income of $68,000 a year including their deemed income, and employment income, without affecting their pension because they would still be asset tested.

2. Valuing assets

Your own home is not assessable, but your furniture, fittings and vehicles are assets tested. Many pensioners fall into the trap of valuing them at replacement value. This could cost them heavily because every $10,000 of excess assets reduces the pension by $780 a year. Make sure these assets are valued at garage sale value, not replacement value. This puts a value of $5,000 on most people’s furniture.

3. Don’t spend just to increase pension

There is no penalty for spending money on holidays, living expenses and renovating the family home, but don’t do this just to increase your pension. Think about it. If you spend $100,000 renovating your home your pension may increase by just $7,800 a year, but it would take almost 13 years of the increased pension to get the $100,000 back. Of course, the benefit of money spent should be taken into account too – money on improving your house or travelling could have huge benefits for you. The main thing is not to spend money with the sole purpose of getting a bigger age pension.

4. Revaluations

Each year on 20 March and 20 September, Centrelink values your market-linked investments, such as shares and managed investments, based on the latest unit prices held by them. These investments are also revalued when you advise of a change to your investment portfolio or when you request a revaluation of your shares and managed investments. If the value of your investments has fallen, there may be an increase in your payment. If the value of your investments has increased, then your payment may go down.

The rules are in favour of pensioners. If the value of your portfolio rises because of market movements, you are not required to advise Centrelink of the change. It will happen automatically at the next six monthly revaluation. However, if your portfolio falls you have the ability to notify Centrelink immediately.

5. Gifting

You can reduce your assets by giving money away but seek advice. The Centrelink rules only allow gifts of $10,000 in a financial year with a maximum of $30,000 over five years. Using these rules, you could gift away $10,000 before June 30th and $10,000 just after it, and so reduce assessable assets by $20,000.


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6. Superannuation

There is devil in the detail. If a member of a couple has not reached pensionable age, it’s prudent to keep as much of the superannuation in the younger person’s name because then it is exempt from assessment by Centrelink. However, the moment that fund is moved to pension mode, it’s assessable irrespective of the age of the member.

7. Mortgaged assets

A common trap is when a loan is used to purchase an investment property with the loan secured by a mortgage against the pensioner's own residence. The debt against an investment asset is only deducted from the asset value if the mortgage is held against the investment asset. If the mortgage is secured against an asset other than the investment asset, the gross amount is counted for the assets test and the loan is not deducted.

The effect on the pension could be horrendous.

8. Family trusts

Family trusts can cause problems with both income and assets tests for the age pension. Thanks to the information sharing and matching abilities between Centrelink and the ATO, you can bet that Centrelink will know if a family trust is involved in your affairs.

Even if you have a high-risk child (such as a child with a relevant disability) who makes Mum the appointer or default beneficiary for asset protection and there is no ‘pattern of distribution’, Mum could be caught.

It’s a complex topic. If there is a family trust somewhere in your financial affairs, I suggest you take expert advice long before you think about applying for the age pension. It may pay big dividends.

9. Bequests

Bequests are another trap. There is a big difference between the asset cut-off point for a single person and that for a couple. As at 20 September 2021, the single homeowner cut-off point was $593,000, whereas for a couple it was $891,500. Many pensioner couples make the mistake of leaving all their assets to each other, which can cause a lot of extra grief when the surviving partner finds they have lost their pension as well as their partner.

An example Jack and Jill had assessable assets of $740,000 and were getting around $11,800 a year in pension. Jack died suddenly and left all his assets to Jill. This took her over the assets test limit for a single person and she lost the pension entirely. Had he left the bulk of his estate to their children she would have been able to claim the whole pension plus all the fringe benefits.

10. Jointly owned assets with adult children

A wrong decision in the past can have serious consequences in the future. Think about a couple aged 52 who want to help their daughter into her first home. Without taking advice, they bought a 50% share of a house worth $400,000 so that the daughter could obtain a loan. Fast forward 15 years when the house is now worth $900,000 of which their half share is $450,000.

Their other financial assets were worth $600,000 so they believed they would be eligible for a part pension. To their horror they discover that their equity in the daughter’s home of $450,000 took them over the assets test cut off point. If they transferred their share to the daughter the capital gains would be $225,000 after discount, on which capital gains tax could well be at least $80,000.

Furthermore, they would have to wait five years to qualify for the pension because Centrelink would treat the $450,000 as a deprived asset for the next five years. The total value of the CGT payable and the pension lost could be at least $150,000. If they had been aware of the trap, or taken advice, they could have gone guarantor for their daughter, possibly putting up their own home as part security and this would have had no effect on the future pension eligibility.

 

Noel Whittaker is the author of 'Retirement Made Simple' and numerous other books on personal finance. Email: noel@noelwhittaker.com.au. This article is general information and does not consider the circumstances of any individual.

 

49 Comments
AlanM
January 09, 2022

In the good old days, a retired couple who had accrued a $1m either from investments or downsizing, stuck it in a term deposit and happy days. A modest but sufficient gross income split two ways - pay the bills, have a modest hollie every once in while, keep the Kingswood purring and sleep easy at night. Now that $1m struggles to earn 0.5% or $5000 pa - trouble big trouble. Oh and the good ole days : 1985 > 2011 TD rates 13.85% > 5.00%. The GFC, central bank QE and IR policy decisions and retail banks searching for interest rate spread to maintain profits have stripped the earning capacity of capital. All this has loaded the govt pension system. What happens next ???

Dudley
January 10, 2022

"What happens next ???":

Disease sweeps across China cutting interdependent supply lines. Inflation entrenches negative real interest rates for years. Gold beckons. Then along comes Paul Volker III and 10% real interest rates.

John
January 07, 2022

This should really annoy Gen X and subsequent generations: I never planned to live on the aged pension, but I made sure I would get almost the equivalent by working for the Federal Government for just 5 years from my late 20s before heading to the corporate world. For only 5 years of service as a low-ranking public servant, Comsuper pays me an indexed and 66% reversionary $20k p.a. plus a 10% tax offset. No need to report income or assets to Centrelink. I invoked this pension at 55, and kept working in the private sector. The best part is I got all my contributions and earnings back, tax free. Comsuper are wonderful people, aren't they?

James
January 10, 2022

Good for you! However, stories such as this highlight the egregious hypocrisy of Government policy and fairness in all matters superannuation.That public servants still often get 15.4% superannuation input (paid by the tax payer) whilst the Hoi polloi only 10% rising to 12% eventually, speaks volumes.

Bomoh
January 07, 2022

So the objective of the advice seems to be to enable the middle class to keep receiving welfare. It's about time tax was slashed and people encouraged to stand on their own feet. The government gives nothing without first taking it from someone else.

Ruth
January 07, 2022

Once, when the country made and sold actual goods and services and was truly productive, everyone got the age pension. In addition, we had full employment. Jobs were also real and productive, unlike what I see today. If you keep attacking the 'middle' class, you will soon find there is none left. That is the road to poverty for the country.

SMSF Trustee
January 09, 2022

You're kidding. When we "made things" they were expensive, protected behind tariff barriers, the opposite of "productive". Consumers had to put up with crap cars, for instance, because decent ones were priced out, diverting lots of income away from other spending and holding us back big time.
We are a much more economically productive nation now than back in the day.
Besides, the ageing of the population would have posed the same problem for the old economy as it does for us. That's the challenge.

Trevor
December 26, 2021










The capital gain after discount would be
$125000 not $225000 as they Contributed $200000 at the start.

Geoff C
December 20, 2021

Many years ago when the Pension was introduced the govt of the day set aside a percentage of tax to pay for it. Over the years other governments transferred that to `general revenue' so they could spend it - typical.

Same with Govt super scheme. The govt was the only employer not required to make super contributions up front. Now they are squealing about the amount they owe to the scheme and now `we' have to fund it from current revenue.
If we simplified the rules - so what if a couple of millionaires get a pension! They have probably contributed more than blue collar joe over the years anyway and the savings on over zealous public servants who scrutinize every dollar would probably go a long way to funding it.

Rudolf Ruyter
December 21, 2021

There is a very easy solution to all these pension (& many other) problems...... On behalf of all Australians the govt receives royalties on all our resources exports..... These royalties are far more than needed to pay ALL adult Australians a dividend of say $20k/year...no matter what their personal income is.....(This $20K would replace all pensions & benefits already paid by the govt). (Kids would get $1k/year for each year old up to 20 years old).... (and income tax would start at the 1st $ wage earnings) 

Rudolf Ruyter
December 23, 2021

Sorry to see that my above comment was edited/shortened for posting ....
There was a lot more to my comment.....
it is not as simple as indicated above as eg all award wages would need to reduce accordingly for appropriate economic benefit.
Regards Rudolf

Tony
December 19, 2021

The system should not be rorted on behalf of wealthy people to receive the pension. It’s means tested for a reason, and articles like this are not welcome.

Dudley
December 20, 2021

"means tested for a reason": What reason? No means test in NZ.

Geoff R
December 20, 2021

>What reason? No means test in NZ.

exactly! We could learn a lot from NZ. At the very least give "the prized Pensioner Concession Card" to all people of pensioner age.

we do have a very distorted welfare system full of inconsistencies, perverse incentives, interactions and red tape.

Kevin
December 20, 2021

Dudley other countries have social security taxes to fund pensions,I think NZ is one of those but I am not sure.
Working in a few countries ( but not NZ) I tried to educate myself about them.Obviously the English speaking countries were easier.
So the UK has NICS ( national insurance contributions).In rough numbers this is 25% of wages,13.5% or so contributed by the employer,and 12.5% by the employee.This funds pensions,national health and other social security .35 years of contributions are needed to get a full pension,around £180 per week.The USA seems to follow much the same system,but they have 401K plans,503 plans and many other savings systems to increase pensions,IRA,Roth IRA,all with different tax treatments.The UK has ISA,SIPPS and other things,but started later.The social security pensions are not means tested so the queen would get the age pension in the UK .Governments everywhere seem to take pride in making retirement as complicated as possible.However they are all moving to put the onus on the individual rather than the state.The lack of young people to pay these social security taxes seems a reasonable assumption to me.The US projected a shortfall would occur in 2017,more would be paid out in pensions than would be collected through the social security system,I don't know if this occured.
Turning to the UK with around 12 million pensioners @£180 a week these are huge numbers to be funded by workers paying their weekly NICS.When there were 7 or 8 workers to pay pensions and health care costs that would seem to be OK.When there are 3 or 4 and people are living much longer it is not sustainable.The health care costs alone must be huge

Australia may or may not be leading the pack in pensions,but I think other countries will start to means test or reduce the annual rises in pensions so the onus falls more on the individual.
For me the Australian system matures in 2050 when workers have had 50 years of super at 9% contributions and up.Perhaps by 2050 it may be a case of spend your super first and then come to us.I do think workers will be better off than having a state pension only,and perhaps the people that fall through the cracks may be better looked after( hopefully).
Just my thoughts,people will have to learn how to invest for themselves,or be dependant on super.
The really strange thing is that everybody seems to be dependant on stock markets now.Have we created a monster?

Dudley
December 20, 2021

"other countries have social security taxes to fund pensions": where the principal difference is that government invests and controls the money whereas in Aus individuals do - until 'condition of release' in both systems. UK makes 'no' / little provision for those who made no NI contributions and are not a wife of a husband who has. UK does not have the equivalent of the Age Pension - is has the equivalent of (government managed) Superannuation - as do many countries.

Kevin
December 21, 2021

No Dudley ,the simple solution is usually the answer. The system is pay as you go ,they take the money in,and they pay it out.Some years it is in deficit,some it is in surplus.

Audited accounts 9/12/21
Contributions £111.6 B
Inv income ( in surplus this year) £41.5 M ( very small)
Other odds and ends take total contributions to £114.3B

Paid out £106.6B other odds and ends take paid out to £108.7 B.
The UK govt will meet their pension obligations.Some years deficit,some years surplus.Deficit years will become common,they have been telling you that since the 1980s,no young people to pay for the old people.
PAYG systems are very simple,same as wages.Some weeks you are in surplus after paying bills.Some weeks deficit.People seem to always want to make things complicated.
It seems employee is 12% of wages,employer is 13.8% of wages They have bands,same as tax bands.

Dudley
December 21, 2021

"The [UK] system is pay as you go": but contributor can not withdraw until 'State Pension Age'.

'The money is held in the National Insurance Fund (NIF), separate from the Consolidated Fund. Contributions are not "taxes" because they are not directly available for general expenditure by the government.'
https://en.wikipedia.org/wiki/National_Insurance_Fund

"Some years deficit, some years surplus.": UK government run NI system is similar to an Aus super fund from the perspective of the contributor.

The clear difference is the absence of a non-contributory Age Pension in UK available from 'State Pension Age' (~half pension > 80 y?).

Lester Pearce
December 31, 2021

Tony - do you mean “wealthy people” to include those who worked hard, did not smoke, sacrificed holidays, made their own coffees etc? They took responsibility or their own lives and should not be “punished” for it. Lester

Geoff R
December 19, 2021

> it would be nice to see a shift in mindset from the pension being an entitlement to acknowledging that it means you haven't saved enough for your own retirement

yes that would be nice.

experience shows that only a very small minority cater for themselves in retirement - the vast majority of retirees get the pension. The only answer I can see is forced savings probably through increasing the superannuation levy to between 18 and 20%. The great majority will simply spend whatever they receive so better that they don't receive it in the first place.

and all the welfare rules are complex with many interactions.

wouldn't it be wonderful to simplify it? No assets tests, no income tests. No penalties for being responsible and saving. No perverse incentives to spend your money on a cruise or getting a new kitchen and bathroom. Everyone simply gets the same amount.

there are so many "claw backs" in our system that create ridiculous outcomes and incentives. Look at a fairly recent one - the LMITO which effectively adds 3% to the marginal rate of tax between 90 and 126k. Many claw backs at the lower end create poverty traps with very high effective tax rates - I say "get rid of them all".

So a universal pension in the short term and a UBI in the longer term with a flatter taxation structure. We could get rid of ALL pensions, unemployment benefits and other government welfare. And get rid of all poverty traps at the same time. A simpler system without all the overhead of a bloated government system implementing all the current red tape.

Yes I know: "tell him he's dreaming".

Greig P
December 20, 2021

Yes excellent insight Geoff, labelling people like us 'socialists'; how do we ever expect the poor taxpayers to pay for it all!?! When it is pointed out that the tax concessions on Super Pensions together with the compliance/administration expenses exceed the Aged Pensions Paid, and is a form of socialism for the wealthy, that is not usually appreciated. Scrap or reduce some of the overly generous concessions and that would easily pay for a UBI/universal pension. The $1.7M pension limit is at least a first small step in this direction. So wealthy couples can still commence a pension with $3.4M (and this can grow) and never pay any tax on the earnings. So in an average year when their balanced/growth portfolio earns ~10% they pay NO tax on the $340k in earnings. A very generous gift for sure; specially in comparison to those who might actually have to work for a living and would pay over six figures in tax on such income. Labor's attack on franking credit refunds for this cohort was barking up the wrong tree, in my opinion. There would be no franking refunds if they actually had to pay some income tax.

Kien Choong
December 19, 2021

Thanks, interesting article. I doubt I would ever qualify (and hope I don't ever find myself needing pension), but I suggest republishing this article (or an update) every year. I think it would be useful for many of us. (Especially those of us too cheap to seek out financial advice! Ha ha.)

Nicola Emanuel
December 17, 2021

1).I see alot of comments about retirees having $800 in assets , and how tjey don't deserve to recieve the pension.
Well little do those people realise, the retirees had already paid an extra 9%tax to pay for that pension, while working for 40 years. Its not an extra tax to the younger generation.
2). Could you do an article on reversed mortgages please.
The huge pit- fall, In sure would be that if we have a reverse mortgage and live to 90 plus years , like my mother. Where will we find the money to put ourselves into aged care? Our house will go to the Bank for paying of the reverse mortgage and the tax payer will be funding our aged care home living .
Believe me that will cost so much more than $800 in assets and a house. We will have to all go into Government aged care homes in which there are not enough of them. Better start building them.
If this system , reverse mortgage, comes in , In a big way due to preasure from the younger generation , whom have no idea of the cost of private age are homes.They will be in for a nasty shock as the tax bill for us oldies will be huge, instead of self funded.

Gemmabella
December 17, 2021

Aussie Hifire sounds young, who lives on Sydney Nth. Shore, (or equivalent) attended a private school, and university, never lived in a suburb with high unemployment, never been retrenched at 50+, never struggled to pay off a home over say 30 years and probably never had to choose between buying shoes or having food. Wait till you are 67 or 70 and see if your opinions on who should receive the Single Aged Pension of $967.37 pfn have changed. $967.37 × 26 does not equal $37,000 per year.

Geoff R
December 19, 2021

> $967.37 × 26 does not equal $37,000 per year.

yes I think the single rate is currently around $25,155 pa whereas the rate for a COUPLE is around $37,924 per year.

I have seen estimates that for a couple, by the time you add in all the health and energy benefits the pension is worth close to a million dollars. Another time I read it was "only" worth $600k. I guess it depends what assumptions and rates of return you are basing your calculations on.

But it is a large hand-out by any measure.

Aussie HIFIRE
January 06, 2022

Actually I'm in my mid 40s, live in a large regional city, went to state schools and then a second/third tier university in a regional city, have spent plenty of time in poorer suburbs, and have been made redundant a couple of times.

Also if you look at what I said it was not that people should not receive any age pension, it was that the assets test should be reduced significantly. For the record my household spending last year for a family of 4 was about $37k so roughly the same as the age pension for a couple (no mortgage). Top that up with some extra income from your own investments and it is entirely possible to have a comfortable life.



Aussie HIFIRE
December 16, 2021

Some great examples of common pension traps here, but I think the biggest one is expecting that the rules around eligibility won't change. Given the massive debts the country has run up over the past couple of years and even prior to that, it is quite astonishing to me that we continue to give thousands or even tens of thousands of dollars each and every year to couples who own their own home and have high single digit hundreds of thousands of dollars in assets on top of that.

Yes it will be politically unpopular when one party or another finally reins in this ridiculous spending by reducing the asset test thresholds, and similarly when the family home is incorporated into the assessment one way or another, but eventually it must be done and the sooner the better for the sake of future generations who are going to be stuck paying off all this debt.

Dudley
December 16, 2021

"reducing the asset test thresholds": Then the retiree's objective would be to arrive at Age Pension age with less assessable assets.

Abolishing the means test would abolish the incentive to impecuniosity.

Aussie HIFIRE
December 16, 2021

Or retiree's to be might accept that the taxpayer shouldn't be on the hook for funding the lifestyle of millionaires (which many pensioners are if you include the home and their savings particularly in Sydney and Melbourne), and that the age pension is a form of welfare so that instead of trying to get as much of it as possible they should be trying to support themselves.

I don't kid myself that everyone will do this, but it would be nice to see a shift in mindset from the pension being an entitlement to acknowledging that it means you haven't saved enough for your own retirement, and the further the assets test is cut the more likely we are to see this change.

Dudley
December 16, 2021

"reducing the asset test thresholds" ... "funding the lifestyle of millionaires" ... "trying to support themselves": That would increase the asset taper rate from an increase of $0.0774 / y in Age Pension payment for each $1.00 decrease in assessable assets. Currently it is 'impossible' to find a risk free investment that pays 7.74% / y. = (26 * 1458.60) / (891500 - 405000) = 7.74% Hence the allure of the risk free, capital free Age Pension.

Phil
December 16, 2021

Dudley, what does impecuniosity mean?

Aussie HIFIRE
December 17, 2021

I see no reason why we should be giving several thousand dollars a year to a retired couple who have $800k in investments plus the family home. I would be quite happy reducing the assets test threshold quite sharply, to pluck some numbers out of the air let's say for couples who own their own home $200k as the lower threshold and $400k as the higher limit. With a 20 year life expectancy from age pension age that means that the couple would receive about $37k a year from the age pension plus roughly $10k a year from their own savings even if they just kept up with inflation, so $47k a year which should be quite comfortable for two people with no mortgage and no kids at home. If they want more than that in retirement then they can save for it while they are working.

Also I don't believe the deeming rate is supposed to reflect a risk free rate, investors are or at least should be expected to take on at least some risk with their investments.

Dudley
December 17, 2021

= (26 * 1458.6) / (400000 - 200000) = 18.96%. Unbeatable risk free rate of return. Stuff all but $200,000 in home, capital gains ~6% / y tax free. All with < ~$800,000 beat the doors down.

Sophia de Avalon
December 16, 2021

The current push is for pensioners to sell their home and downsize. This is also a trap because Centrelink sees any left over profit from the sale, if it is kept in a savings account, as "deemed income", whether it earns interest or not.

James
December 16, 2021

A millionaire today, often due to outsize property price growth, ain’t what it used to be! Affordable property in nice locations is getting very hard to find, even if you downsize!

Denise Roach
December 17, 2021

Hifire. People who ow their own home have been paying off their mortgage for years. Not relying on government rental assistance or public housing. So start saving and buy something instead of pulling people down. But I do agree people with 800k of assets it's ridiculous to give them a pension however leave the family home alone. Thanks.

Jack
December 19, 2021

A couple who own their own home with $800,000 in assets jointly receive a fortnightly pension of just $273.60 , or an annual benefit of of $7113.60. In fact, the more assets this couple have over the threshold of $405,000, the less pension they receive. Once their assets exceed $891,500 they receive no pension at all. The pension is withdrawn at the rate of $3 per fortnight for every $1000 of assets over the threshold - the so-called taper rate.
An extra $100,000 in assets reduces the annual pension by $7,800. Put another way, reducing your assets by $100,000 by upsizing your family home for example (which is a non-assessable asset), will increase your pension by $7,800 per year (7.8%) which is more than that $100,000 can earn.
As Dudley often notes, you maximise your income by having no more than $405,000 in assessable assets to maximise the pension plus the income those assets can earn. Any more assets than that with reduce your income because they are unlikely to earn better than (7.8%) as the pension is withdrawn.
I’d call that perverse incentives.

Bakker
December 19, 2021

Aussie HIFIRE…demonstrates an unfortunate but understandable ( for his/her/other) age an attitude where all they see is wingeing pensioners looking to gain more from the system. However HIFIRE seems to ignore benefits like the huge and growing child care benefits, first home grants and concessional loans (for some ), education incentives and loans, COVID relief programmes..all things available to most except pensioners. Also in our day, no childcare (just imagine that today). No soft education loans/ incentives. No natural disaster relief. Sometimes it is only living through life’s cycles which gives one the wisdom to offer an informed opinion. History and human nature would also indicate that when HIFIRE reaches pension age, he/ she will be fending off ill informed comments from a new HIFIRE…..life’s cycle goes on.

Anthony Asher
December 16, 2021

Why are the rules so complex and potentially unfair to those who do not get advice? and
Why do we feel that millionaires should be receiving welfare?
Are we incapable of changing?

Dudley
December 16, 2021

"Why are the rules so complex": To prevent unworthy millionaires collecting welfare. "Why do we feel that millionaires should be receiving welfare?": Because they paid for it all.

Lily
December 20, 2021

Many hard working people paid tax in their lifetime, it's unfair not giving them age pension.
"Age pension" is such a deceiving name, I have no issue not receiving it IF its name changed to "hardship pension".

Lily
December 16, 2021

Very informative article!
It's very annoying that when you are gifting to children, you have to consider that you are not losing 50% of it to the in-law should there be a relationship break-up.
Is there any solutions to ease that worry?

Ricky
December 16, 2021

If I'm gifting to my child, I would suggest making it a personal loan to that child. This would be in writing, with a repayment of the full amount payment as and when I require. If their marriage doesn't work out, my loan is not part of the assets split 50/50. My child retains the gifted amount, the in-law does not get access to any portion of that gift.

Lily
December 20, 2021

Thanks Ricky, but a loan is still treated as your asset, it won't help you qualify for age pension...

Lee Clarke
December 16, 2021

Lily any decent planner will have a strategy to solve your problems regarding your questions, however, a decent Planner will charge you for that advice but weighed up against the potential loss of capital good advice will be
very cheap in the scheme of things.

Greg W
December 16, 2021

If it's a 'gift' for a property purchase, a caveat over the title for a 'payable on demand loan' may be the way to go. But the 'loan' will likely count as gifting for as long as the caveat is in effect and five years after, not only for OAP purposes if that's in the picture, but also towards assets taken into account for the means tested daily payment (in addition to the other daily payments) if one or both parents go into residential aged care. The caveat will likely also restrict the child's borrowing capacity (which may be a good thing!).

Lily
December 20, 2021

I read somewhere that such an "on demand loan" could be treated by Family Law Court as a gift thus splittable.

Wendy Carvalho
December 18, 2021

Superannuation / best place to hide money from centerlink

Jack
December 16, 2021

Just when you think you know all the rules, Noel hits the ball over the fence. Oh yes, my mind must be on the Ashes starting today.

 

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Investment strategies

Three ways index investing masks extra risk

There are thousands of different indexes, and they are not all diversified and broadly-based. Watch for concentration risk in sectors and companies, and know the underlying assets in case liquidity is needed.

Investment strategies

Will 2022 be the year for quality companies?

It is easy to feel like an investing genius over the last 10 years, with most asset classes making wonderful gains. But if there's a setback, companies like Reece, ARB, Cochlear, REA Group and CSL will recover best.

Shares

2022 outlook: buy a raincoat but don't put it on yet

In the 11th year of a bull market, near the end of the cycle, some type of correction is likely. Underneath is solid, healthy and underpinned by strong earnings growth, but there's less room for mistakes.

Gold

Time to give up on gold?

In 2021, the gold price failed to sustain its strong rise since 2018, although it recovered after early losses. But where does gold sit in a world of inflation, rising rates and a competitor like Bitcoin?

Investment strategies

Global leaders reveal surprises of 2021, challenges for 2022

In a sentence or two, global experts across many fields are asked to summarise the biggest surprise of 2021, and enduring challenges into 2022. It's a short and sweet view of the changes we are all facing.

Shares

What were the big stockmarket listings in record 2021?

In 2021, sharemarket gains supported record levels of capital raisings and IPOs in Australia. The range of deals listed here shows the maturity of the local market in providing equity capital.

Economy

Let 'er rip: how high can debt-to-GDP ratios soar?

Governments and investors have been complacent about the build up of debt, but at some level, a ceiling exists. Are we near yet? Trouble is brewing, especially in the eurozone and emerging countries.

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