What is deeming ...and why care?
RECENTLY there has been a lot of chatter around deeming rates and changes made for part-pensioners.
Deeming is the method that Centrelink and the Department of Veterans Affairs use to calculate the income from your financial assets when determining your entitlements for the Age Pension (as well as other benefits such as Disability Support Pension and Newstart Allowance) under a means test.
Deeming assumes that financial investments are earning a set rate of income, regardless of the amount they are actually earning.
There are two components of means testing - an asset test and an income test.
Centrelink calculates your Age Pension on the test that generates the lowest eligible pension amount.
For seniors with financial assets who are assessed under the income test, the change in deeming rates is welcome given the current low interest rate environment.
The government has cut the deeming rate for large investments from 3.25 per cent to three per cent, and for smaller ones from 1.75 per cent all the way down to one per cent.
Individuals may earn up to $174 per fortnight, couples up to $308 before their pension entitlements are impacted by the income test.
Income in excess of these amounts reduces pension entitlements by $0.50 for every dollar assessed for income test purposes.
The changes mean that couples whose income is assessed using deeming may receive up to $1053 extra year, while singles could receive up to $804 extra a year.
While the payments will be backdated to July 1, 2019 the payment adjustments will be processed from the end of September 2019.
So, what should I be doing?
My biggest tip is to become friends with the MyGov portal. Learning how to navigate the website will pre-empt the need for long, frustrating calls and time spent waiting on hold to Centrelink.
Embracing new technology might seem a little overwhelming at first but it's definitely worth it in the long run.
Regular maintenance and keeping your Centrelink details up to date will pay off, both in terms of your finances and your valuable time.
I helped clients last year update investment values during the share market downturn.
Doing so resulted in a back payment of $517 and an increase in pension entitlement of $42 per fortnight per person or $2184.
Don't overvalue your home contents
When adding your home contents remember this is not the insured amount but the 'fire sale' value.
Think about if you were to put all your possessions in a garage sale, what would you receive?
I've seen cases where home and contents are valued at $60,000 and when you think about the fire sale value it's really nowhere near this amount.
Check your super / income
Your superannuation/ income stream provider updates Centrelink with your balances in March and September each year.
If you see a change in your pension payment around then check the latest balances on MyGov as this might explain the adjustment and save you another Centrelink phone call.
Finally, here are a few things you can update / do yourself online:
- Upload bank statements, rental agreements, superannuation and income stream information.
- Upload receipt details for assets purchases such as your new car, trailer, caravan, motorcycle, etc.
- Update your income.
- Change your bank account details.
- Update your personal details, such as change of address, phone numbers, email.
- Lodge your application for Age Pension, Carer's Allowance or Pension.
- Manage appointments with Centrelink.
- Change your nominee arrangements.
- View your payments history and next payment details.
- Submit complaints or provide feedback.
Dianne Charman, of Jade Financial Group, is an authorised representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706. Any advice given is general only and has not taken into account your objectives, financial situation or needs. You should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.