Age Pension: how are assets valued?

How will the purchase of a new car affect Diane’s Age Pension?

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?

Q. Diane

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.

Related articles

Centrelink asset change notification
Income and asset tests





    COMMENTS

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    Nan Norma
    4th Jul 2016
    10:20am
    Your car is now secondhand. It lost a few thousand straight away. if you look on the internet for used cars you might find yours. That will give you some idea. But if you were trading in your car for another you would get much less so that is the value of your car now.
    particolor
    4th Jul 2016
    10:47am
    They valued My Bomb at $1,000 :-) I nearly took them up on the offer ! :-) Only Id have to walk 4 K's to the shops and 4 K's back as there's NO Public Transport where I live :-( :-(
    Young Simmo
    4th Jul 2016
    12:28pm
    Parti, a simple solution. Get an oversize hot air balloon, a kids scooter and only go shopping on very windy days. Oh also, don't forget the shopping bag to put the carton of Scotch in.
    particolor
    4th Jul 2016
    12:36pm
    There a couple of Hot Air Balloons fighting for Prime Minister at the Moment !! :-) :-)

    4th Jul 2016
    11:00am
    If you REALLY want to know how much your car "may" be worth have a look at the "Redbook" website. It will give you a value for private sale or trade-in. A value between these two estimates cannot successfully be argued against by Centrelink, but remember that the car's condition may alter it's value, as well as can it's odometer reading. Another source for values are the apps "Carsales" or "Drive". Updates of this ever-depreciating asset should be given to Centrelink at least once a year if your pension is being asset tested. Good luck.
    Blossom
    4th Jul 2016
    12:56pm
    Redbook is a good guide but it doesn't take into account the distance it has travelled. If you have a high distance compared to the age of the car it will be worth less.
    Once a motor vehicle has done over 100,000km the value drops a lot more.
    Alexii
    4th Jul 2016
    11:14am
    I update the values of assets such as car, van and trailer once or twice a year. i usually knock off a couple of thousand each time. They seem to be quite "happy" about that. Don't overestimate the values. With assets such as household furniture, etc, whatever you do, don;t use your insured value - it's completely different to what you'd get for them if you had a "fire sale". Just look at the low prices people usually get at house clearance auctions, garage sales and so on. A second hand lounge, dining chairs, frig, whatever is usually not worth much and they accept these low valuations.
    kentucky
    4th Jul 2016
    11:30am
    When you drive away from the dealer you have just lost about 11% of the new car price,after 12 months you can write the purchase price down by 25%. I.E.= New $30000 drive it out of the dealer it is now worth $26700, 12months later your $30000 car is worth 25% less and now valued at $22500.
    PlanB
    4th Jul 2016
    11:34am
    It is surprising just how much a new car devalues in a few years -- also anything you have as an asset is valued at the price you would get for it if you took it to sell second had now -- what might have cost you $2000 quite some time ago may now be worth $10 . $50
    maelcolium
    4th Jul 2016
    11:54am
    I purchased a car for $40000 in 2013 and it is now worth $20000. I got the valuation from carsales website and this was confirmed by the insurer's market valuation. I valued my house contents at $1000. I recently sold up aged parents contents and this is more than I was able to collect from the sale.
    Many elderly people value their assets at what they paid for them or what it would cost to replace them. Don't be stupid. They are almost worthless in a sale.
    Rae
    4th Jul 2016
    2:25pm
    Exactly. We sold my mum in laws whole house of very good quality goods for only a few hundred dollars.

    My dad's very ordinary furniture etc went mostly to charity or the tip because we simply couldn't sell it.

    I recently wandered around a very nice Vinnies and could have furnished a complete house with antiques including clothes, linen, china etc for less than $2000. The dining table, lounge suite etc were really lovely at $230 and $249.

    4th Jul 2016
    11:54am
    Whatever you do Diane, don't buy your car from "Turnbull's Used Cars".
    particolor
    4th Jul 2016
    12:27pm
    Moustache Twirler Motors ! MT Motors :-) :-)
    rodders
    4th Jul 2016
    1:04pm
    Nor would I buy a car from Bill either or believe any "warranty" bull as like Medicare scare, all bullsh..
    Anonymous
    4th Jul 2016
    1:18pm
    Rodgers, you will never know if that was a real "scare" or not. I, personally, would not discount one bit the possibility of the LNP privatising Medicare if they retain power. Turnbull is as slippery as an eel. Don't kid yourself.
    PlanB
    4th Jul 2016
    1:57pm
    Eddie ,-- remember Abbotts promises No cuts to medicare -- no cuts to the pension -- no cuts to the ABC or SBS and Howards NO GST ALL broken -- once these sods get in they will do what the hell they want, I would not trust them as far as I can kick UP HILL

    They are already stuffing around with the Medical system -and the PBS that has cost us a heap.
    particolor
    4th Jul 2016
    2:48pm
    WHERES MY NBN TURBULL ??? :-( :-(
    :-)
    Supernan
    4th Jul 2016
    1:12pm
    The Centrelink guy we first saw said "Value your assets as if you had to sell quick & had to take the best offer you could get "
    Anonymous
    4th Jul 2016
    1:19pm
    Yes, and that means lower than snake shit in a wheel track.
    robmur
    4th Jul 2016
    2:07pm
    I purchased a new car in September 2014. Our financial advisor told us to do the following: 1. immediately reduce the value of the car by $1000. 2. after 12 months reduce the value of the car to $15,000. 3. after two years reduce the value to $10,000. At each of these three stages go into the Centrelink website, go to Income and Assets, change the value of the car. Centrelink will then adjust your age pension accordingly. I did as advised and had no problems with Centreling.
    Aviatorman
    4th Jul 2016
    2:08pm
    Anyone know the best way to value a 'van.? Mine is now 17 years old, and in reasonable condition. But, because not too many are for sale, its hard to value. And what happens if you tell Centrelink its worth say $5,000 but then in 3 months you sell it for $10,000. I guess you simply advise them its no longer an asset and give 'em your new bank balance which probably needed adjusting anyway.!!
    Anonymous
    4th Jul 2016
    3:19pm
    At 17 years old it's value would best be calculated by it's weight - scrap metal.

    4th Jul 2016
    2:42pm
    I realise that the article is about assets and valuations but I feel it could be pointed out that by drawing cash to buy another asset there may be a change to income. If the deeming rate is in play because of cash assets, there will be a reduction in income which may cause a small increase in the pension.
    Briar
    4th Jul 2016
    7:05pm
    I used an assessment on RedBooks.com for a valuation of my car when applying for a Centrelink Pension, and they accepted that. Which reminds me that I need to advise them that it has devalued since then... thanks for the reminder.
    Anny nanny
    4th Jul 2016
    7:29pm
    I recently notified Centrelink of a new car purchase of $65k and the girl on the phone actually told ME the price they would use approx 10k less. She also checked my car and dropped the value of that at the same time ( mine is 18months old)
    Anonymous
    4th Jul 2016
    8:15pm
    Depreciation is the biggest cost of owning a car. You were lucky to get THAT person at Centrelink.
    Pass the Ductape
    5th Jul 2016
    1:31am
    Hmmm...I think I have better things to do with the rest of what life I have left, than to sit on a computer, or continually trying to get through to Centrelink on a phone to advise Centrelink of my varying sorry financial position!

    If they think I'm cheating them out of a few dollars, they're welcome to send me to jail, (seems the only thing they're really good at) and Centrelink would likely look after me better in n jail anyway.
    Romeital
    31st Oct 2016
    12:09pm
    Centrelink require you to advise them of changes to your assets but that is easier said than done
    If you make an online update it will probably lock you out from making any further updates until a staff member has reviewed it which they are very slow at doing
    You could ring them but they probably wont answer
    You could go to a Centrelink service centre and wait standing in a queue anything up to ten minutes then get told to wait anything up to in excess of an hour to get to see a staff member who probably doesnt know what they are talking about
    Good luck trying to do the correct thing by Centrelink
    Its about time aged pensions were removed from Centrelink and put with a department who care about the job they are doing
    Oliva
    20th Dec 2016
    12:13pm
    Yes Centrelink is a Bureaucracy. Bureaucracy has a bad reputation because it has come to mean an organization or government that is chin-deep in red tape and unnecessary procedures"". We were bullied by Centrelink/Human Services when we went from work bonus to age pension because they wanted to reduce our bonus-which they did. The stress caused to us was not necessary. They did us out of about $12k but we saved the taxpayer $100k in pension payments and still paid tax for the 4 and 5 years that we worked past retirement age. These matters can be simple but half of them would not have a "job" if the system was streamlined. We need a trump tp drain the swamp.

    21st Sep 2017
    11:46am
    I bought a new car for $17,000 the year I retired and applied for the aged pension almost in the same month and wrote the value on the pension application as $10,000 (lowest estimate I could find on line) The car was 2013 model bought in 2014. Value not questioned by Centrelink
    GrayComputing
    15th May 2018
    11:39am
    It is time for all of us to rant at our PMs to take action for human decency and a huge stress reduction for pensioners

    NO ASSET TEST FOR A PENSION EVERV AGAIN!
    A pension is not welfare.

    Most economist say we will save taxpayers money by dropping asset testing because of the massive overheads cost in running Centrelink and the 10,000 conflicting rules
    Even poorer New Zealand has a NO ASSET pension so it is cheaper and user friendly,

    Do retired and retiring people really look forward and want 100++ visits to/from Centrelink and be part of 3 million waiting queues and lost calls?

    Does your MP really like being part of the system that allows this indirect abuse of the elderly?

    This abuse is actually sponsored by our government and forced down to Centrelink and borders on a criminal act.

    Why do MPs normally compassionate persons let this Centrelink abuse happen at taxpayers’ expense?

    Some opposition and independent MPs stand to lose their chance at being part of the needed government changes

    We all need to tell our MP that these criminal asset tests for a pension must be dropped now.
    NO ASSET TEST FOR A PENSION EVER AGAIN!
    mogo51
    8th Jan 2019
    10:58am
    A new car drops about 10% immediately you drive it out of the showroom. At the end of the first 4 years, it has dropped 50% on average, it does vary a little on what you bought.


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