Understanding social security
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Understanding social security Version 4.4
This document provides some additional information to help you understand the financial planning concepts discussed in the SOA in relation to social security. Important information This document has been published by GWM This document contains general information Adviser Services Limited AFSL 230692, about the benefits, costs and risks associated registered address 105-153 Miller St North with certain product classes and strategies. Sydney NSW 2060, ABN 96 002 071 749 for It is designed for use in conjunction with a use in conjunction with Statements of Advice Statement of Advice that takes into account the prepared by its authorised representatives circumstances and objectives of an individual. and the representatives or authorised Before making a commitment to purchase or sell representatives of National Australia Bank a financial product, you should ensure that you Limited, Godfrey Pembroke Limited, Apogee have obtained an individual Statement of Advice. Financial Planning Limited and Australian As legislation may change, you should Financial Services Licensees with whom it has ensure you have the most recent version of a commercial services agreement. this document.
How to read
this document
Managing your There are all sorts of issues you need to
consider such as taxation, legislation,
finances to meet protecting your wealth and assets,
your day to day associated costs and the inherent
risks of investment. When undertaking
requirements a financial plan it is important you
understand how these issues will
as well as your impact you and what you should expect
long-term goals can over time.
be a complex task. Your financial adviser will provide you
with a Statement of Advice (SOA)
which sets out the details of the
advice and how it will meet your goals
and objectives.
This document provides some additional
information to help you understand the
financial planning concepts discussed in
the SOA in relation to social security.
It is very important you read this
document to help you understand the
benefits of the strategies recommended
to you and the associated costs
and risks.
Please contact your adviser if you do not
understand anything, or need further
information or clarification.
Page 3 Understanding social securityUnderstanding
social security
Pensions and allowances Assets test
The Australian The following is a list of some
common types of social security
Different assets may be treated in
different ways by Centrelink and DVA.
Government offers pensions and allowances: Some assets may be fully or partially
a range of social • Age Pension exempt. For example, any amounts held
within an accumulation superannuation
security services • Family Tax Benefit fund are excluded from assets and
and payments to • Disability Support Pension income tests until the owner reaches
support those in need • Newstart Allowance
Age Pension age. This means those
under Age Pension age may be able
and assist people to • Carer Payment to increase the level of their benefits by
become self-sufficient. • Carer Allowance contributing to super.
Benefits are provided The following is a list of some common
types of Department of Veteran Affairs
In some cases, assets you no longer
have could even be counted if they were
through various (DVA) pensions and allowances: sold or given away for less than their
means, such as • Disability Pension
market value.
pensions, allowances, • Service Pension How is the assets test applied?
concessions and aged • War Widow Pension A minimum and maximum assets test
care services. To apply for Centrelink or DVA benefits,
threshold is applied to most pension
payments. For pensions, assessable
basic conditions of eligibility (such as assets below the lower threshold entitles
age, health, employment status) and you to the maximum payment under
residential requirements must be met. the assets test. The maximum payment
is reduced progressively for assets
In some circumstances, an income and exceeding the lower limit.
assets test is also applied to determine
eligibility. In this case, the lower payment For allowances, no payment is payable
benefit resulting from the two tests will under the assets test if your assets
determine the actual benefit received. exceed the lower threshold limit.
Page 4 Understanding social securityUnderstanding
social security
Income test
Income may be treated in different ways From 1 January 2015, the income It is important before you make any
by Centrelink and DVA depending on assessed by social security from changes to a grandfathered pension,
its source. Financial investments are an account based pension will be you seek advice from your financial
deemed by Centrelink and DVA to earn determined under the deeming rules. As adviser to understand any impact on
a specified rate of income, whereas a result, the ‘income’ for social security your social security entitlements.
income from real estate, employment, purposes may be more or less than the
and certain income streams are actual income payments received. To understand the treatment of account
assessed differently. based pensions prior to 1 January 2015,
Some people will not have their please contact your financial adviser.
Deeming provisions account based pensions assessed
under the deeming provisions. How is the income test applied?
Deeming provisions are in place to
simplify income test assessments of This includes anyone: The deemed income is added to any
returns from financial investments. • in receipt of an income support income you have from other sources
payment, such as Newstart, Disability such as income from employment or
Deeming provisions were also put in Support Pension or Age Pension rental income from property. Your total
place to encourage people to maximise immediately prior to 1 January income is then used to work out how
income from other sources without 2015, and; much pension, benefit or allowance can
penalising them by reducing their be paid to you.
Centrelink or DVA entitlements. • an account based pension that
commenced prior to that day. A minimum and maximum income test
Under current deeming rules, almost threshold is applied to most pension
all financial investments are deemed In this case, the account based pension and allowance payments. Assessable
to be receiving a certain level of return, commenced prior to 1 January 2015 income below the lower threshold
regardless of the actual return received. will retain the income test assessment entitles you to the maximum payment
applied prior to 1 January 2015. That is, under the income test. The maximum
Deeming rates are reviewed from time ‘grandfathering rules’ will apply. payment is reduced progressively for
to time to reflect rises and falls in market every dollar exceeding the lower limit
interest rates. There are circumstances under which
you could lose the grandfathering for pensions.
Financial assets include: treatment. This would occur in a
situation where you lose eligibility to your
• bank, building society and credit
income support payment for a period,
union accounts
or if a grandfathered pension is ceased
• term deposits and debentures and a new pension is commenced.
• friendly society bonds This includes:
• managed investments • a switch in products or providers
• listed shares and securities • adding funds to an existing account
based pension, or
• shares in unlisted public companies
• consolidating a range of super and
• certain income streams (see below)
pension accounts.
• superannuation fund investments held
by people over Age Pension age
• loans, including those to family trusts
and companies, and
• gifts, if you have given money
or other assets of greater
than the allowable limit.
Page 5 Understanding social securityUnderstanding
social security
Concession cards
and other benefits
Some common types of social • Rent Assistance • extra services facilities
security concessional cards Rent Assistance is provided to those Some residential aged care
and other benefits include: that pay rent or similar payments to facilities provide a higher level of
private landlords for accommodation. accommodation and care services
• Health Care Card Rent assistance is paid as an addition than the standard facilities. Examples
The Health Care Card is issued to to a pension, allowance, or Family of extra services are higher standard
all allowance recipients and a low Tax Benefit. of food and higher quality of
income health care card is available accommodation, likened to hotel type
for people who have low incomes. services. The range of extra services
This card provides access to cheaper Aged care services offered in an extra service facility varies
medicines under the Pharmaceutical between providers.
Benefits Scheme (PBS). Holders of The Australian Government aims to
this card may also receive discounts An extra services fee is payable if
ensure affordable, accessible and entering an extra service facility.
on public transport. quality aged care is available to all older The amount must be specified on
• Pensioner Concession Card Australians when required. the contract a person signs before
The Pensioner Concession Card taking up residence. There are
Aged care facilities
is issued to all pensioners or part no government set limits on extra
pensioners and some other social Where it is no longer possible to stay at services fees.
security recipients who receive at least home due to ageing, illness or disability,
the Australian Government funds places • Home care
$1 of pension payment per fortnight.
In addition to the benefits provided by in aged care facilities offering quality care Whenever possible, home care assists
the Health Care Card, the Pensioner and services. people to remain at home despite
Concession Card may allow access to the effects of ageing. There are a
other discounts such as reductions on To be eligible for Government subsidised number of programs available to assist
motor vehicle registration and drivers’ aged care facilities or services, an older Australians who would qualify
licences, council rates and several assessment must be undertaken by the for home care. There are a range of
other state based discounts. The Aged Care Assessment Team (ACAT). services including:
actual discounts available will depend Some common types of aged care – Personal care such as helping
on your local or state government. services include: with day to day living activities
• Commonwealth Seniors (eg showering or bathing, mobility)
• residential aged care
Health Card – Support services such as washing
Services provided in aged care
The Commonwealth Seniors Health and ironing, house cleaning and
facilities will differ depending on the
Card provides access to cheaper transport for shopping or doctor
individual person’s needs. Some
medicines under the PBS and other appointments
facilities provide assistance with
discounts such as free ambulance meals, laundry and personal care. – Clinical care such as nursing or other
transport in some states. To qualify for Other facilities will provide a higher health services (eg physiotherapy).
this card you must have reached Age level of care including nursing
pension or Service pension age and care, meals, laundry, cleaning and These services aim to meet basic
must not be entitled to or have chosen personal care. needs of older Australians to maintain
not to claim an entitlement to social their independence at home and in
security benefits. There is no assets the community.
test limit to get this card but there is an
income test limit.
64404M0115
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