Pensioners are often considering donating part of their estate to charities or the church.
Would it not be better if you donate now rather then waiting until you die.
It may give you more satisfactions to realise some of your wishes now.
The end result is the same but you are not only good things for the community now but also creating more disposable income for yourself.
In session 3 we discussed the Pension Loan Scheme. You can borrow $572 per FN as a single pensioner and $862.60FN as a married couple if you own your residence or an investment property. It is payable fortnightly or can be paid as a lump sum of $14,872 or $22,427.60 for the first year and fortnightly thereafter. You do not have to pay the loan as the loan + interest accumulates until it reaches approximately 50% of the value of your property at which stage your fortnightly payment may stop.
You still do not have to pay back the loan until you die or sell the property.
You can use the loan for any purpose: medical equipment, holiday or just supplement your living costs. The best use of the loan is to buy investments.
You could set up an investment funds for the beneficiaries of your will or for your grand children.
Pension affected under the asset test
There is only one strategy for these pensioners and that is to reduce assets to increase the pension.
You can do this by gifting, a holiday, medical treatment etc but also by using the Pension Loan Scheme.
People assessed under the asset test are probably the poorest people of all. They normally will have one or 2 investment properties which have increased in value over the years and moved them into the asset test.
The income from rent is less than the reduction in pension. Then there are repairs on the investment properties.
They are probably worse off than people on the full pension.
They are asset rich and income poor.
The first thing to do is to sell the investment properties and probably by a new property to take advantage of the depreciation allowances
You are in a very strange situation that the government will give you money for nothing.
The Pension Loan Scheme was originally designed for people owning their residence and use the equity in their homes to supplement living cost. You have been struggling all your life working for your home and the home is finally paying you back and is now working for you
If you borrow money against your residence it does not reduce your assets as Centrelink does not take that loan into account.
If you borrow against your investment property Centrelink takes that as a liability which reduces your assets
For every $1 dollar borrowed, your pension increases by 7.8cts or 7.8%
You must spend that money in things that will not be regarded as assets.
This could be a holiday, charity, medical, furniture, and a lease
One way of spending the money is a donation to charity
For every dollar Borrowed
Income
You If you borrow 50% of the pension, (Say $500) your disposable income will increase by:
Income from loan $572FN
Increase in pension @ 7.8% $ 44.62
Total $616,62
Cost
Loan $572.00
Interest on loan @ 3.95% $ 22.59
$594.59
Gift from the Government $ 22.03FN
You can decide how much of the income you want to donate to charity and how much you want to help you in your living costs.