How shares affect the Age Pension

Janet is concerned that an elderly acquaintance may not be getting the correct Age Pension assessment.

YOURLifeChoices member Janet is concerned that an elderly acquaintance may not be getting the correct Age Pension assessment. Craig Hall of NICRI aims to clarify what his options are.

Q. Janet
If you own shares in a company that has never made a profit nor paid a dividend, does this prevent you receiving any pension? An elderly gentleman that I know created a company of which he is a major shareholder.  He did this because he invented something, which one day perhaps may be used and will create an income, but it is still a work in progress.

He told me that because of the shares he owns, he can’t get any Age Pension. He is in his seventies, and he and his wife live off her income, as a part-time receptionist.  Because she wishes to retire, they are thinking of selling their home and downsizing in an effort to create some income to live from.

It seems so unfair, that although they have both worked all their lives and are both still working, because the invention from which he receives no income, are unable to get an Age Pension.

What would be your advice?

A. Provided by Craig Hall, NICRI
I refer to your enquiry regarding Age Pension eligibility being affected by ownership of shares in a private company.

Assessment for private company shares differs to publicly listed shares, but nevertheless, they are still assessed. Legislation relating to assessment of such assets was changed – effective 1 January 2002 and can be complex. Details of the assessment method for such assets depends if a market exists or not. If one does exist then generally market value is used to determine the value, if no market exists a different method is used (often referred to as the ‘net asset backing’ method). This method, in basic terms takes into account the value of the company assets (both tangible and intangible) less liabilities, divided by the number of shares issued to determine the share price. Based on the information provided, it would seem likely that this method would be used to determine the value of his share of the company.

More detailed information on this method as well as other government income support assessment information can be accessed by searching ‘Guide to the Social Security Act’ via the Department of Families and Housing, Community Services and Indigenous affairs (FaHCSIA) website www.fahcsia.gov.au.

Once the asset value is determined, it is assessed along with any other assessable assets (such as money in the bank, cars, home contents etc.).

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    COMMENTS

    To make a comment, please register or login
    Samuel
    21st Jul 2017
    4:30pm
    What I know about the share stores is that, there are various types of share plans according to your investment planning. Basically funds, i.e. share assets or ETF are for long term goal investment plans, there are additionally a few assets are accessible for retired individual at https://foragerfunds.com/australian-fund-summary/.Here you can begin with little capital likewise and get the advantages of the value.


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