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Find out what your peers are asking – based on real-life questions submitted to TechConnect.
By Scott Quinn, Senior Technical Services Manager
Q: My clients (a couple aged 71 and 72) are self-funded retirees. They have recently purchased a home in a lifestyle village (not a retirement village) and are required to pay site fees of $400 per fortnight. They are homeowners for Centrelink purposes. They have been told that they might be eligible for Rent Assistance but don’t know how this could be the case when they don’t receive an Age Pension. They have assessable assets of $880,000 which exceeds the couple homeowner cut-off threshold of $876,500. Can they receive Rent Assistance?
A: If eligible, the amount of Rent Assistance is added to a primary payment, such as the Age Pension, and then the ordinary income and assets test for that payment is applied. The asset cut-off threshold for the primary payment is effectively increased. This means that if someone is only marginally over the standard income or asset test for the Age Pension, they could get a part Age Pension due to becoming eligible for Rent Assistance.
Rent Assistance for a couple (with no dependent children) is calculated at 75c for every $1 exceeding the combined rent threshold of $201.80. The maximum fortnightly Rent Assistance is $131.60 (combined) where fortnightly rent (or site fees) is at least $377.27. The amount of Rent Assistance paid to each member of a couple where both are eligible for the Age Pension is one half of the total Rent Assistance payable. In this case, $400 per fortnight is paid in site fees, so the maximum Rent Assistance applies and each member of the couple may be entitled to the $65.80 per fortnight each (half the maximum combined rate of $131.60).
As stated previously, the amount of rent assistance is added to the primary payment and then the ordinary income and assets test for that payment is applied. The potential Age Pension (including supplements) and Rent Assistance payable to each member of this couple is $777.60# per fortnight. The asset free threshold for a homeowner couple is $401,500. For every $1,000 exceeding this amount, the couple combined Age Pension reduces by $3 per fortnight or $1.50 for each member of the couple.
Applying the assets test, the couple have excess assets of $478,500 ($880,000 - $401,500). The reduction for each member of the couple under the assets test is $478,500/1000 x $1.50 = $717.75 per fortnight. This results in a payment for each member of the couple of $59.85 per fortnight ($777.60 - $717.75).
Note in this scenario we have assumed that the couple are subject to the asset test not the income test. The means test that results in the lower entitlements is the prevailing test.# Basic rate of Age Pension ($648.70 pf) + Pension Supplement ($52.50 pf) + Energy Supplement ($10.60 pf) + Rent assistance ($65.80 pf) = $777.60 pf.
If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.
DisclaimerThe information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.