19th Jun 2017

Age Pension: is my credit card limit assessed as an asset?

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red folder with assets and liabilities printed on the spine
Debbie McTaggart

Elisa is unsure how Centrelink will class credit available to her and her husband when it comes time to apply for an Age Pension. Is it a liability or an asset?

Q. Elisa

I am 65 and I retired last year and don't receive an Age Pension as my husband is still working full time. Early next year, he intends to go part time and work perhaps two or three days a week. When he reduces his hours, we believe that we will both qualify for a part Age 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 $15,000 credit limit. We pay it off completely each month so we do not pay any interest. Is this $15,000 classed as an asset by Centrelink? 



2. We have a $100,000 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. A Visa card is a credit card and will be assessed as an asset for Centrelink purposes only if the card has a positive balance. Cards that 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. For example, if you make a payment of $2000 to your credit card and it has no debit balance, which means you have available credit of $17,000, then the $2000 will be assessed as a financial asset and subject to deeming, the $15,000 will not.

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 nor deemed for income purposes. If you withdraw money for a holiday and place it into an account with a positive balance, it would count as a financial asset and deemed to earn interest until withdrawn and the holiday is paid for.

Therefore, any liability with a zero or negative balance is not classed as an asset. Find out more about Centrelink deeming rates and rules.

Related articles:
Age Pension eligibility
Income and asset tests





COMMENTS

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SuziJ
19th Jun 2017
10:33am
Is this the same for Pre-Paid Visa Debit cards?
HDRider
19th Jun 2017
11:07am
I thought this was a bit 'common sensical' personally. Pre Paid Visa has anything in the positive, ie $1 then it is a $1 asset YOU put the $1 there therefore it is YOUR $1 asset. Should you hide $10,000 on a pre paid credit card then you have a $10,000 asset, it is cash and it is yours!
I think question's/writing's like this are a reason for the younger generation to whinge and whine about us elder generations, it appears the more we have the more we want!
Jim
19th Jun 2017
4:57pm
What an absolutely ridiculous statement, the younger generation whinge and moan because they are from the entitlement era, so far as the confusion about credit cards being an asset I recall when I first went to Centrelink the young lass who I was unfortunate enough to be saddled with was extremely rude to start with when I had mislaid one piece of my documentation and told me I needed to get rid of a lot of the paper work that I was presenting Centrelink with her opinion was I didn't need most of it, but she wanted to cancel my appointment because of the one piece I had mislaid, fortunately I found the item before she had the chance to cancel my appointment, she then went on to assess my Visa card as an asset because she stated that I had access to a $3500 credit limit so therefor it was considered as available funds, I asked to see a supervisor because I was fairly certain she was wrong, she went and spoke to her supervisor, guess what her supervisor must have put her on the right track, she came back and removed the credit as an asset, no apology, I know people can make mistakes or maybe having a bad day, but to assume as you have that people are trying to hide money is nonsense.
ex PS
20th Jun 2017
1:26pm
Correct assumption Dim, any financial organisation you care to go to will list your Credit Card limit as an opportunity for you to incur extra debt. No way could anyone who knows anything about finance include possible Credit Card Debt as an asset.
I am normally on the side of the Public Servant, but in this case I feel that the young person involved should be disciplined and retrained. A Public Servant should never be allowed o get away with providing advice which disadvantages their client.
inextratime
19th Jun 2017
11:29am
Pretty simple really. If you have the money its an asset, if you don't its not. If you borrow money you have to pay it back so its not an asset, tho what you bought with the money may be.
Rainey
20th Jun 2017
8:29am
Not simple at all when dealing with Centrelink. If someone owes you money and cannot pay, Centrelink deem it to be an asset even if you can prove you'll never be able to collect. If you write it off, it's a ''gift'' unless you spend a lot of money on debt collectors and a court claim. This can present serious problems for some struggling applicants for pensions. One I know was denied a pension because he was owed money by a public company that was winding up. Until the wind-up was complete and there was a written advice that the company was liquidated and debts would not be paid, the $100,000 he was owed was classed as an asset.
ex PS
20th Jun 2017
1:33pm
Yes Rainey, it always seems to fall to the governments advantage. No surprises there.
Aussie
19th Jun 2017
11:34am
Wowowowo give the government more ideas to reduce our pension ...Great

Deeming rates and rules can change very quick and then, all our credit and Debit cards may be consider as accounts or part of available income ..... Why not ???? is money available to you any time same as having positive balance in your account

We need to think what we publish in this forum ..... We have many very intelligent people with great ideas and those ideas could create a change to the way the pension is assess .... Need to think before we publish

Is my opinion
Retired Knowall
19th Jun 2017
4:50pm
If you don't stop it, you will go blind.
niemakawa
19th Jun 2017
5:01pm
The Government think tanks will undoubtedly advise the Government to include available funds in the assets tests. You are reuqired as a senior citizen to pay for a life of luxury for all of our "guests". They have come from war torn areas, abused in Australian detention centgres, are Gay and fear persecution if they are deported, have a human right to a family life. Australia the country that gives and keeps giving to those that will give nothing in return. Doesn't it make you proud!!
ex PS
20th Jun 2017
1:35pm
YES.
MICK
19th Jun 2017
12:00pm
You are starting to worry me Debbie. Is taking a breath of fresh air an asset or a liability? And how will Centrelink view me breathing?
You must be struggling to get newsworthy stories. Have a look at the DailyMail perhaps.
Crowcrag
19th Jun 2017
12:08pm
Another question? Is tax return money considered income by C'link when calculating the pension?
johninmelb
19th Jun 2017
12:35pm
If you stick it in the bank, then of course it becomes part of your assets, which are assessable.

e.g. if you have $5000 in the bank, which you have declared to Centrelink, and you get a $1000 tax refund paid into that account, then you have to tell Centrelink you now have $6000 in the bank. If it's just a piddling amount like $50, then I wouldn't bother.

This is just common sense, I cannot understand why you are asking such a basic question. We all know these rules.
Crimmo
19th Jun 2017
12:31pm
I was told once that when applying for a bank loan, a credit card limit is treated as a liability. Thus reducing the amount you can effectively borrow. If this is true, then the same criteria used to assess eligibility to a credit card limit, as is used to assess eligibility to a loan. Do banks do this? No, and not good business. I realise this is another issue.
ex PS
20th Jun 2017
1:38pm
All lending institutions regard access to money that will incur interest charges as a liability. If you require a substantial loan you need to asses whether you need to keep your Credit Card. You can always re-apply for one after you get your loan.
niemakawa
19th Jun 2017
1:00pm
Not for now but I am sure the Government is working on it to include all lines of credit. They have just incurred a debt of 90 million for being nice to people. Need to get the money from somewhere and pensioners are always the number 1 target.
MICK
19th Jun 2017
1:25pm
Don't forget the $50 billion tax cuts for the wealthy. Somebody is going to have to pay for those as well unless this crew is going to chalk that one up on the national accounts as well.
ex PS
20th Jun 2017
1:39pm
For being nice to people, you are joking aren't you.
OllieB
19th Jun 2017
1:39pm
Can you tell me, if one looses their Age Pension and does not receive one any more, due to the threshold of Assets and Income tests, BUT receives a Pensioner Health Care Card, are they still tied to DHS’ policies of having to inform Centrelink of any changes in their circumstances eg.

a)Change of address or
b)Informing Centrelink when they go overseas and when they return to Australia

I am aware that you cannot use your Pensioner Health Care Card whilst overseas.
niemakawa
19th Jun 2017
1:49pm
National Seniors Australia 1300 76 50 50 maybe able to answer your questions if you do not want to contact Centrelink direct.
niemakawa
19th Jun 2017
1:49pm
National Seniors Australia 1300 76 50 50 maybe able to answer your questions if you do not want to contact Centrelink direct.
niemakawa
19th Jun 2017
1:59pm
To add, although you are no longer elegible for the pension Centrelink will retain your historical records indefinitely. Once on their books your data will never be erased.
Retired Knowall
19th Jun 2017
4:54pm
You don't need to inform them as they will already know. and if you stay out of the country longer than the maximum time your card will be cancelled.
Sundays
19th Jun 2017
3:16pm
Credit cards are not treated as an asset or as a liability. Therefore as per all loans, you can't reduce your assets by the amount you owe. if you have $20k in the bank and owe $10k on you credit card, Centrelink still treat you as having a $20k asset.
ex PS
20th Jun 2017
1:46pm
If you have $20,000.00 in the bank and a $10,000.00 Credit Card bill, you need to look at the way you are managing your finances. Why on earth would you pay five times more interest on a Credit Card than you can possibly earn on a Bank account?
Every banking institution I have dealt with up until twenty years ago treated Credit Cards as a possible debt and was definatley treated as a liability. But as I have not taken out a loan for twenty years I acknowledge things may have changed.
Crowcrag
19th Jun 2017
7:51pm
Thank you , Johninmelb for your clarification, but not for your assessment of my financial knowledge. Clearly, I did not know that, otherwise why would I have asked? My thoughts were that the pension has already been worked out on gross earnings and already paid on that. Therefore, overpayment of tax is what the govt. owes me back. Sorry to be so ignorant!
ex PS
20th Jun 2017
1:48pm
There are no stupid questions, but there are apparently less than smart replies,
whatsupdok
19th Jun 2017
9:44pm
Curious about how my pension would turn out if I returned to my first country. I'm eligible to receive my full pension overseas exclusive of the time frame and I also receive a pension in my home country.
Gunner
22nd Jun 2017
3:50pm
Would a gaming card be assessed as an asset? eg:. I have a gaming card and winnings are automatically paid direct to that card over time. Any comments?
Rainey
23rd Jun 2017
12:41am
If it has a positive balance - i.e. there are funds on the card you can draw - the funds are an asset. The card itself is not, but any funds on it accessible to your or a co-pensioner partner for spending are an asset.


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