Increasing your Age Pension

Increasing your Age Pension

If you are not already receiving the maximum Age Pension, there may be some strategies available to you that could legitimately increase your entitlements.

Centrelink applies Assets and Income Tests to determine the amount of benefit you may receive. The lower calculated benefit payable under each of these tests will be the actual benefit received.

Below are some of legitimate strategies to reduce Centrelink assessable Assets and Income for these means tests and potentially increase your Age Pension entitlements up to the maximum pension.
Gifting for Centrelink purposes means giving away money or assets for less than their worth. Amounts gifted less than $10,000 pa or $30,000 over a rolling 5 year period are excluded from the Assets and Income test.
Funeral Bonds
A funeral bond is an investment that generates interest. This interest is added to the investment to help pay for your funeral. The total amount is paid on death to your estate or funeral director to cover funeral expenses, Funeral Bonds purchased for less than $12,000 per person or couple are not included in Centrelink’s Assets and Income test.
Purchasing an Insurance Bond via a Trust
By holding a certain type of Insurance Bond (imputation Bond) within a Trust structure that is controlled by you, the investment capital is not deemed under the Centrelink Income Test, allowing you to maximise your Age Pension benefit.  It should be noted however that your investment capital remains fully assessable under the Centrelink Assets Test.

Some other pertinent points to be aware of with this strategy:

  • Insurance bond earnings are taxed internally, at a flat rate of 30% as opposed to an investment held outside of a trust structure being taxed at marginal tax rates.
  • If the Trust retains the bond through to maturity (a period of at least 10 years), all earnings are deemed tax paid and are not included in the trust’s assessable income.  Withdrawals inside the 10 year period are permitted; however part or all of the growth on the bond will be assessable as income to the trust and may have a negative impact to your Centrelink Pension and Income Tested Fees, however a 30% personal tax offset applies.
  • Switching between investment options (to take advantage of market fluctuations) will not constitute a capital gains tax (CGT) event and therefore no tax is payable on the gain.
  • The investment proceeds of the bond are “tax-free” distributions to nominated beneficiaries (whether pre or post 10 years) upon bond maturity in the event of death.
  • The bond’s investment passes outside of the will and legal estate – and without the wait and cost of obtaining probate.

So whether your considering retirement planning or looking at your options around aged care, retirement villages or homecare; planning to increase your age pension is a strategy worth considering.