Diane is using some of her savings to purchase a new car but is unsure how her Age Pension payment will be affected under the income and asset test. Will she lose out?
With the purchase of a new car I believe it becomes an asset. I also understand that, when declared to Centrelink, the amount of money taken out of savings to pay for the car reduces the amount of cash on hand in the bank and the Age Pension is adjusted by Centrelink based upon this new information.
I was under that the impression once the car is driven out of the sales yard it depreciates in value. So, how does one go about working out for Centrelink the value of the new car? I don't think one could recoup the price paid for the new car if it had to be sold within a short time. Is there a formula to use, and does Centrelink decrease the asset value of the car each year? Or do I have to advise them each year of the car’s new valuation?
A. Firstly, you are correct that any amount of money taken out of your bank that can alter your financial circumstances should be advised to Centrelink. This may result in you being paid more Age Pension under the income test.
However, if you use that money to buy an assessable asset, such as a car, you may find that this decreases your Age Pension payment under the asset test.
As you know, Centrelink pays the lowest amount calculated once the income and asset tests have been applied.
In regards to how Centrelink assesses the value of the car, it will generally accept the market value of the vehicle, even if this is now less than what you originally paid for the car.
Centrelink will not automatically apply a rate of depreciation to assets on an annual basis. You will have to advise if the value of your assets have changed enough to have an affect on your Age Pension payment.
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