Family Companies may Impact on Eligibility Tests for the Centrelink Age Pension
Later in your life the government provides age pension to ensure that elderly people have a minimum level of income to meet their retirement living expenses. To be eligible for an age pension you have to pass three tests. Age-test eligibility for the age pension is satisfied if you are a resident of Australia and have reached 65 years. In order to determine how much benefit you are entitled to receive the assets and income tests are used. The test that provides the lowest pension entitlement applies.
Impacts on Age Pension
The income test compares your level of ordinary income with the income threshold and determines whether you are eligible for age pension. Ordinary income includes employment income, rental income from a property and income from financial assets, which is subject to the deeming rules. The deeming rules assume your financial assets are earning a certain amount of income, regardless of the income they actually earn. The financial assets include deposits, share portfolio, an asset-tested income stream and others.
The assets test determines the maximum value of the assets that you can own before it affects your pension. Almost all assets that you or your partner own or have an interest in are counted towards the limit, but there are certain exemptions. The exempt assets include your principal home as well as your spouse’s superannuation balance if the spouse is under 65 years of age.
If you hold a share in a private company or an interest in a private trust it may affect your eligibility for the age pension. The value of the shares is included in determining the eligibility under the assets test and any dividends you may receive – under the income test. Moreover, if you have a certain level of control in a private company or trust, the income and assets of that company or a trust may be attributed to you reducing your eligibility for age pension.