home – Adelaide Financial Advice

Home Care/Help – what a blessing

January 18, 2018/in Financial Advice General Info /by Fil-Battisti

Do you have elderly parents living on their own, in their own home? Have you noticed their ability to look after themselves has declined, although certainly not to the extent where you need to consider placing them in residential aged care?

What are your options?

As a first step, you can research the services available through the Commonwealth Home Support Program.

Your parents will need to talk to a local assessor from the Regional Assessment Service about the care they require and develop a comprehensive support plan to assist and make their life a little easier.

The services available through the Commonwealth Home Support Program are very comprehensive covering domestic assistance, personal care, home maintenance, transport, social support and food services including helping to shop, cook and delivering meals to the home.

A couple of very important points regarding the Commonwealth Home Support Program is that even though the government subsidies a range of services available through this program, you do not need an income assessment – the fees you pay are negotiated between yourself and the provider. Secondly, an assessment carried out by the Regional Assessment Service is quite different and not as comprehensive as an assessment carried out by the Aged Care Assessment Team.

These teams will provide a written assessment of the help required and make a recommendation as to the level of support a person is eligible to receive. The levels are as follows:

Level 1 supports people with basic needs
Level 2 supports people with low-level care needs
Level 3 supports people with intermediate care needs
Level 4 supports people with high-level care needs

The government provides a different amount of subsidy for each level. This amount is paid to the provider that you select. The subsidy contributes to the cost of the service and care, however, depending on your circumstances, you will be required to contribute to the cost of this care.

Your level of contribution will depend on the financial details provided by you to either Centrelink or Veterans Affairs. They will assess your circumstances and based on a complicated formula, advise you in writing of your daily financial contribution. This income-tested amount is on top of the standard contribution of $10.17 per day, which everyone pays regardless of their finances.

If we are able to provide the care and assistance to a person in the home either through the Commonwealth Home Support Program or one of the levels of the Home Care Packages, this should always be the first option.

Source: Mark Teale | Centrepoint Alliance

Your Home – how attached are you?

August 3, 2017/in Financial Advice General Info /by Fil-Battisti

Oakley sale

louis vuitton handbags outlet

I am going to look at home ownership from an older generational point of view.

For the majority of age pensioners, their home is the largest asset they own and in most situations the most expensive asset. The costs associated with owning a home are not minor, from council rates which can be quite high depending on where you live through to water rates, the ongoing maintenance and of course the yearly home insurance premium.

For a single age pensioner, with very little other income outside a full pension, these costs can prove quite high, but in all my years of talking to retirees, suggesting a person sell their home and downsize is normally met with a scowl and that this is not an option.
Why is it not an option?

For a large number of people, the house they currently live in has been their home for a lengthy period of time. It is where they have raised their children, it contains special memories or it could be the last place they lived with their spouse who has since passed away. Like their neighbours, they feel secure, they are comfortable with the task of travelling to their local shopping centre or their doctor is close by. Last but not least, if they have extra cash after selling their home and buying a smaller home would this affect their pension?

Accessing the equity in your home via a reverse mortgage could certainly be an option. But again the fear of making the bank your silent partner again, holding mortgage papers on your house can be a very daunting thought for an older single age pensioner.

Trying to educate and change a person’s mind and attitude who maybe in their eighties in relation to home ownership and the age pension is not easy. However, for a person in their fifties and sixties approaching their retirement, I believe this education and attitude change is a must, going into the future.

Source: Mark Teale | Centrepoint Alliance

Loans and encumbrances; a pension minefield

August 4, 2016/in Financial Advice General Info /by Fil-Battisti

For most people, being debt free in retirement is a priority. Others find the concept of ’good debt’ in retirement less stressful.

From an age/service pension perspective the correct structuring of good debt is important to ensure that any entitlement you may receive is not adversely affected.

When it comes to the Social Security Act – loans and encumbrances can be complicated and, in some cases, a little illogical. It is very important to understand that the taxation rules relating to debt are not necessarily the same as social security rules. For example; real estate investments can be considered.

So – let’s consider this real estate investment scenario:

An offer ‘too good to ignore’ comes your way and you decide to buy an investment unit down the road from where you live and rent it out. You then visit your bank (or your mortgage broker) to enquire about an investment loan.

The broker (or bank) are most impressed with you and decide that they will lend you the money to buy the unit. However; in addition to taking a mortgage out over the investment property they also need to secure the loan against your residential home as well.

From a taxation and a social security income perspective this is not an issue as (in both cases) the interest payable is deductible from the rent for the purposes of your tax and pension assessment.

However; there is one very important issue to consider. A person’s pension entitlement is also based on the value of their assets. The fact that the loan is secured against an exempt asset (family home), and an assessable asset means that the portion of the loan secured against the exempt asset (your home) is not used to reduce the asset value of the investment unit.

Care needs to be exercised here – as net rental income being received may not necessarily cover the reduction in a person’s pension in some circumstances.

When it comes to borrowing money to invest into shares or managed funds, the assessment side of things are slightly different.
The value of the asset shares, in this case, is reduced by the amount borrowed. For example – $50,000 is borrowed to purchase a parcel of shares valued at $100,000. Provided the loan secured against the shares – for the purposes of the assets test – the portfolio has a value of $50,000. The ‘hidden nasty’ here is that for the assessment under the income test, the whole value of the portfolio is viewed as a $100,000 share portfolio.
This is treated as a financial asset and it is this value that is subject to the relevant interest rates.

Unlike tax – the interest expense is not deducted from the income being deemed against the $100,000 portfolio.

“Oh…” I hear you say! And that is without even discussing the issues associated with loans to family trusts and companies, going guarantor, and associated loans.

When you are retired and receiving the Age Pension – borrowing and lending money (as well as going guarantor for loans taken out by your kids) can be a minefield with unwanted consequences.
So before you dive into the world of borrowing to invest – seek out the appropriate advice from an expert in the area.

Source: Mark Teale, Centrepoint Alliance

Posts