When is a liability an asset?

YOURLifeChoices subscriber Elsa is unsure how Centrelink will class credit available to her and her husband when it comes time to apply for an Age Pension. We ask Centrelink when is a liability assessed as an asset?

Q. Elsa

I am 65 and I retired last year, so I know that I do qualify for the Age Pension.  My husband is also 65 and is currently working full time.  Early next year he intends to reduce his hours and work perhaps two or three days per week.  When he reduces his hours, we know that we will both qualify for a part pension. Currently, our assets are below the threshold, but my query is whether the following two items are classed as assets by Centrelink?
 
1.  We have a Visa card with $10,000 credit limit.  We pay it off completely each month so we do not pay any interest.  Is this $10,000 classed as an asset by Centrelink?
 
2.  We have an $80,000 line of credit with our bank, secured against our home.  We took up this line of credit about 12 months ago while we were doing home renovations, but now it is paid off is this classed as ‘available funds’?  If we do not draw down on it, and leave it there ‘for peace of mind’, is it classed as an asset? If we draw down, say $10,000 to go on a holiday, is the $10,000 classed as income or as an asset?

A. Provided by Centrelink

A Visa card is a credit card and will be assessed as an asset for Centrelink purposes if the card has a positive balance. Cards which have been prepaid are a financial asset as the available balance can be used to purchase goods in the same way that cash can. The credit limit liability itself is not assessed as an asset, only the positive balance which would also be subject to deeming.  
 
A similar principle is applied to 'Lines of Credit'.  A Line of Credit is a loan secured against a customer's asset, usually the principal home. The approved funds are available to the customer to access. For Centrelink purposes, only an account with a positive balance can be assessed as an asset and subject to deeming.

Typically a Line of Credit account has a negative or zero balance and is not an assessable asset or deemed for income purposes. If you withdraw money for a holiday and it ends up in an account with a positive balance, it would count as an asset and deemed until withdrawn.

Therefore, any liability with a zero or negative balance is not classed as an asset. For more information on Centrelink deeming rules, visit Centrelink.gov.au.