How are shares assessed?

David has had a big share market win but is now worried about his pension payment.

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Q. David
We are full pensioners with no assets except for $40,000 in a savings bank account. I recently had a share tip from a friend and purchased 50,000 shares at $0.17 with some of those savings. These shares are now worth $0.47 cents and I don’t understand what the position is with Centrelink. Of course, if I sell all the shares there is quite a bit of profit or, if I just sell enough shares to recoup my outlay, where do I stand? Also, what happens if these shares continue to rise?

A. Both shares and any money held in a savings account are treated the same by Centrelink and are assessed under the income and assets test.

Under the assets test, the value of the financial asset is assessed and under the income test, the deemed income is counted.

Centrelink considers account-based investments, market-linked investments and some income streams to be financial investments.

Market-linked investments include: managed investments; shares and securities; bonds; notes and debentures; and superannuation if you’re over the Age Pension age.

For the assets test, Centrelink assesses income streams using their current account balance, while for the market-linked investments, it uses not their face value but their net market value – that is, the last trade or sale price of the investment, minus any loan.

When calculating the income from your investments, Centrelink applies the deeming rules. The deeming rules use the gross value of your investments to calculate the amount of deemed income that will be included in the income test.

Centrelink revalues market-linked investments, shares and securities each March and September.

It either:

  • gets the new values from the latest unit prices it has, or
  • asks you for the latest values.

The current asset test limit to receive the full age pension for a home-owning couple (combined) is $394,500, and as you are still well under this limit, I don’t think that you have too much to worry about, even if the shares continue to rise.

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Written by Ben

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