5 Tips to reduce your assets and increase your pension October 27th, 2022

Prepaid funerals

Assets essentially include everything you own except the family home, where it sits on less than 2 hectares, and a pre-paid funeral fund if you have one.

In fact, pre-paying your funeral is an effective way to boost your pension while providing for an inevitable expense.

Cars, boats, furniture and personal effects

All of the financial assets are included in the asset test as well as the scrap values of cars, furniture and personal effects.

This also provides our next trick to boost your Centrelink benefit if you are receiving a reduced pension because of the asset test.

Remember that each $10,000 reduction will translate to an additional $30 per fortnight. That's the same as "earning" 7.8 percent per annum and much better than you'll earning in any bank account. The key is to make sure the values Centrelink are using are accurate. Contents and personal effects should be listed at their scrap values. Typically, no more than $10,000 in total. Never use the insured value for these fixed assets.

Similarly, cars boats and caravans depreciate. 20 percent per year is about right or use the carsales.com.au valuation tool to obtain the trade-in value. Now, one year older might be a good time to update the values.

Bank account balances, gifts and renovations

Next, make sure the bank account balances Centrelink have recorded are correct. People assume that Centrelink track these balances, but they don't. If you spent money on home renovations or gave away money to the kids, make sure you let Centrelink know!

Both of these are highly effective ways to boost your pension. Home renovations shift money from a Centrelink assessed asset to a Centrelink exempt asset. Gifting money or assets within the limits offloads up to $10,000 instantly.

Shares and investments

If you disposed of shares or other managed investments, again Centrelink won't know unless you tell them. The values used for these investments might seem to be a mystery when you obtain a valuation but that's because of the way the Centrelink systems calculate the value.

Centrelink simply take the number of shares or units you hold in the case of a managed fund and multiply them by a share or unit price, tied to key dates or when you notify them of changes to your circumstances. These share values are updated on a fortnightly basis and managed fund unit prices on a monthly basis. The systems do an automatic revaluation in March and September.

Account based pension valuations are usually re-done automatically in February and August When Centrelink are notified about a change in your share or unit holdings, the entire portfolio is recalculated, based on the most recent prices in Centrelink's systems.

Remember, if your financial circumstances change by more than $2,000, you are legally obliged to let Centrelink know within 14 days.

If you are using a competent financial planner, they should be able to process these updates for you or, you can do them yourself via my.gov.au.

Other tips and tricks

5 Tricks to boost an asset tested pension. Each $1,000 reduction could boost your pension by $3 per fortnight.

1. Spend it. Holidays, a new car, a smart TV. All result in a reduction in assets.
2. House repairs, renovations or upgrade. Moves your assets from an assessed environment to an exempt environment.
3. Gift assets away. You can give away as much as you like, but Centrelink will reduce your assets by a maximum of $10,000 per year with a maximum of $30,000 over 5 years.
4. Pre-pay your funeral either the full amount to a funeral director with no limit or up to $13,750 into a special funeral bond fund.
5. Depreciate existing fixed assets reflecting decreased trade-in values.