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The pitfalls of not updating your details with Centrelink

MAKING the right decisions about your financial situation has never been more important and knowing who to turn to for financial advice is essential. Now that the New Year here, you should set yourself a resolution to check your finances are in order for the year ahead.

Centrelink payments can be a significant source of income for many retirees. If this is the case for you, and your New Year’s resolution will be improving your cash-flow, now is the time to also make sure your Centrelink details are up to date for 2017.

It’s easy to forget to inform Centrelink when things like your income, level of assets or marital status change, but there can be negative consequences if you do.

Centrelink payments are often subject to an income test and an asset test. This means Centrelink will look at your income and assets to work out if you are entitled to a payment and how much.

If Centrelink has incomplete information you may receive lower payments than you are entitled to, or worse be overpaid, have a debt and get into trouble with authorities.

The rules for Centrelink payments (including benefits and pensions) can be complicated. There are a number of Australian and overseas income and assets you need to tell Centrelink about, if you have them. These include:

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Managed investments and superannuation.

Real estate assets, including real estate you own or manage.

Other assets, including personal effects, boats, caravans, life insurance, livestock and motor vehicles.

Other income, including lump-sum payments, commissions, grants and scholarships, leave payments and regular gifts you may receive.

Any savings you have, cheques yet to be deposited, cash-in-hand, money loaned or in deposit accounts.

Overvaluing assets

When placing a value on assets, people often mistakenly provide the value of their assets at the time of purchase, resulting in the overvaluation of assets, and, consequently, a reduced Centrelink payment.

When providing the value of your household assets, you are typically only required to provide a ‘garage-sale’ value for your household contents, which could be as low as $5,000 per person.

In the case of providing a value for your investment property, this relates to the latest rates that you have been required to pay, and not the price at which you bought or would like to sell the property for.

Furthermore, many assets such as your car are fast depreciating. People often leave their car’s valuation the same for years when, in fact, the value of your car depreciates as soon as you take it off the showroom floor.

Although updating your details is a hassle, making sure Centrelink is accurately informed of the value of your assets could mean the difference between obtaining a healthcare card and the various concessions from the Australian Government that this entitles you to, or going without.

Undervaluing assets

Perhaps you’ve received a gift or inheritance that has seen the value of your assets increase. Depending on the value of the gift, this may necessitate a reduction in your Centrelink payment. Failure to update your details as soon as this has occurred may result in you owing money to Centrelink and being required to pay this back!

Be aware of Aged Pension changes

As of 1 January 2017, the taper rate for the pension assets test will increase from $1.50 per fortnight to $3 per fortnight. This means that for every $1,000 of assets over the lower assets test threshold, pension payments will reduce by $3 per fortnight.

The Government has estimated more than 300,000 Australians will either have their pensions reduced, or removed completely as a consequence of the upcoming changes, while 170,000 will have more money in their pockets. In Tasmania the number adversely affected is likely to be between 7,000 and 10,000 people.

There are a number of strategies that you could use to lower the value of your assets, while providing you with greater income in the long term.

These include investing in long-term annuities, upgrading your home thereby reducing assessable assets, gifting (within the allowable limits), as well as funeral bonds and prepaid funerals.

Any one of these options could result in a reduction in your assessable assets, increasing your Centrelink income. This is why it is important to speak with a qualified and experienced financial planner who will help you explore the different options available to you and help you achieve your short and long term financial and life goals. If you are unsure if your details are up to date contact Centrelink.

If you would like to find out more, call Lonnie Weeks at MyState Wealth Management on 1300 651 600 or visit mystate.com.au/wealth

*Matthew Khourey is a Financial Planner at MyState Wealth Management

Information is current as at 7 December 2016. This is general advice only, before making any decisions please speak with a MyState Wealth Management Financial Planner.