A bit too late to get a seniors’ health card
I RETIRED in September and applied for a Commonwealth Seniors Health Card. Centrelink informed me that my income from my account based pension (started before January 2015) would be deemed and added to the income earned for the period July -September.
This prevented me being granted a card.
I thought if a pension was started before that time it was grandfathered. This has prevented me from moving to a fund with a better long-term return. Could you advise whether there is any disadvantage in terms of Centrelink in transferring to a new fund?
From 1 January 2015, the Commonwealth Seniors Health Card (CSHC) has been subject to an income test where any deemed amount from accountbased pensions is added to a person’s adjusted taxable income, to determine their eligibility for the CSHC.
The deeming rules apply to any new account-based pensions purchased on or after January 1, 2015, and accountbased pensions purchased prior to January 1, 2015, but where the person commenced receiving an income support payment or became a CSHC holder on or after 1 January 2015.
The grandfathering provisions only apply to account-based pension products that were purchased before 1 January 2015 where the person was an income support recipient or a CSHC holder on 31 December 2014. The grandfathering provision is maintained while the person continues to be in receipt of the income support payment or retains an ongoing entitlement to the CSHC.
In your case your accountbased pension is not grandfathered, as you applied for a Commonwealth Seniors Health Card in 2017. As a result, the product would be deemed under the current rules introduced on 1 January 2015.
The good news is there is now no downside in moving to a new account-based pension, as it will still be assessed for the CSHC under the deeming rules.
IF I buy a second home, keep the first home and change it to a full-time investment property, should I change the investment loan to an interestonly loan? What should be my investment goals?
The name of the game is to maximise your deductible debt, and minimise your nondeductible debt. You do not want to be paying tax on the rent from an investment property, while stuck with a huge non-deductible mortgage on your residence.
I would recommend you convert the loan to interest only, or a 30-year loan where the first 10 years’ payments consist mainly of interest. This should free up resources to enable you to speed up repayment of the non-deductible debt on your residence.
Readers who have a debt on their own residence now, and are thinking of renting it out in the future, should make sure extra payments are kept in an offset account, and not paid off the loan. This will maximise future tax deductibility of interest.
The name of the game is to maximise your non-deductible debt