Eric believes he is being unfairly assessed by Centrelink and has asked us whether we can help him figure out if his understanding is correct.
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Q. Eric
My wife and I are both age pensioners – I am 83; she’s 72 years old – and we have some superannuation income, with mine being an annuity that ends next month.
We have a mortgaged apartment that we were going to downsize into until the bottom fell out of the market and affected the value of our home, which we do own. We have a tenant in the apartment paying $445 per week.
The apartment is financed on an interest-only mortgage for five years and during this time we hope to be able to sell it and at least break even.
Up until August this year we were each receiving a Centrelink Age Pension. This has been stopped and we are informed that the apartment is now classed as an asset. The value of the apartment, in a subdued market, is currently around $500,000 (we paid $575,000 off plan in 2014) and the interest-only mortgage, which doesn’t get reduced, is for $600,000. All rental income is used to pay the mortgage, agent fees and services, so we receive no income whatsoever from the apartment.
My question is: Should the apartment be assessed seeing that the debt against it is greater than the valuation?
Also, Centrelink have assessed us as having income that equals the rent, which is surely wrong. I have been to Centrelink and discussed this but I don’t seem to get anywhere with them. I have also sent letters explaining the situation fully and don’t even get an acknowledgement of the letters. I am at my wits’ end to get a solution that will restore our Age Pension, as we are getting a bit desperate regarding our living income.
I am sure that any advice you come up with will be of more use than Centrelink’s.
A. First, it’s important to understand that your eligibility for the Age Pension is assessed against both the income and asset test, and that you are paid the lower of the two resulting payments.
Under the asset test, Centrelink uses the market value of the property, which it updates annually. If you feel that the value allocated is too high, you can ask for a valuation at any time.
Any loan amount you owe is deducted from the property value, and the asset test only assesses the amount of the property you actually own.
Under the income test, Centrelink will deduct loan interest payments, rates and property maintenance costs from the income you receive. If you make a loss from the property, then your income will be assessed as zero.
To move forward with Centrelink, you should request confirmation of the test under which your payment is made – asset or income.
Once you have this confirmed, you will be better placed to provide the information needed to either validate that you make a monthly loss based on the income or that you do indeed owe more than the value of the property.
If you are unhappy with the response that you’re given, you can ask for the matter to be escalated and reassessed.
You may also wish to consult a financial planner or accountant with specialist knowledge of Centrelink rules.
All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.
If you have a Centrelink question, please send it to newsletters@yourlifechoices.com.au and we’ll do our best to answer it for you.
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