Look before you leap into pensioner concession card
While a pensioner concession card can provide obvious benefits, going out of your way to qualify can be costly.
If you are nearing retirement and considering you financial situation, the Pensioner Concession Card has probably figured in your planning, but how far should you go to qualify for a Pensioner Concession Card (PCC)?
The PCC can be seen as extremely valuable given it entitles the holder to a range of discounts. This includes reduced costs on medicines under the Pharmaceutical Benefits Scheme (PBS) and, depending on your state and local government authorities, reductions in property and water rates, reductions in energy bills, a telephone allowance, reduced fares on public transport and reduction on car registrations.
One of the ways to qualify for the PCC is to be eligible to receive the age pension, which is subject to both an income and assets test. For this reason, some people who are close to the assets test limit can be become obsessed with getting under the threshold and qualifying for the card. But, before you go on that spending spree or lock your money away in investments that are only partially assets tested by Centrelink, you should do your sums.
To establish what the pension card would be worth, first you should obtain Centrelinks A Guide to Centrelink concession cards which includes a list of concessions for each state. (Contacting Centrelink on 13 1021 or www.centrelink.gov.au). If you do exceed either the income or assets test but you still want the card, there are basically two options for bringing your assets back under the threshold - restructuring through spending or gifting, that is, giving the money away. The value of the card can then be compared against the income that will be given up by restructuring to qualify for the pension.
Restructuring through spending
Spending money will certainly allow you to reduce your assets and if there are things you need or want to spend money on, like an overseas trip, this may be a great option. Remember though, that by spending your money you are forgoing the future income that those funds could have generated. Furthermore you must be careful what you spend your money on if your aim is to reduce the assets that Centrelink will test. For example, buying high-cost goods such as a car will still be included as an asset. One option is to spend the money on renovating your home, as it is an exempt asset so the cost of improvements are also exempt. Plus, the improvements may also add value to your home.
Gifting
Gifting reduces your assets in the same way as spending and often also can address an income test problem as you will reduce direct income from the assets or deemed income from financial assets. There are strict rules on gifting, as it is seen as a deprivation of assets by Centrelink. While it doesnt stop you in giving you money away, you will be treated as though you still have the funds if you exceed the allowable amounts. Pensioners are only able to gift up to $10,000 in a financial year (or $30,000 in a five year period). Anything above these limits will be seen by Centrelink as a deprived asset and they will include its value in your assets and its deemed income in the calculation of your income.
The PCC can be a very valuable benefit to some individuals, but sometimes its perceived value is much greater than the actual value it offers. Its important to be aware of what is being given up in order to qualify for the card.
The best way to ensure that you dont make a costly or irreversible mistake is to contact a qualified financial planner who can explain and calculate all your options. A CPA (FPS) financial planning specialist is an expert in these areas.
