Relevant legislation:
- Social Security Act 1991 (Cth)
- Social Security (Administration) Act 1999 (Cth)
- Aged Care Act 1997
Loans, gifts, mortgages and property transfers can affect how Centrelink views assets and income. This can then affect pensions, benefits, tax entitlements and future aged care fees and charges. Centrelink rules are complex and should be studied carefully. You may also need to refer your client for advice.
- Financial Information Service Officers (FISO) in Centrelink. Anonymous inquiries can be made but information you provide is not confidential. FISOs can also help people to assess aged care fees.
- Social Security Rights Victoria is a community legal service specialising in the impact of social security law.
For information on Centrelink issues, see
- Centrelink
- Information regarding payments and services for people retiring or accessing aged care. Also, information on help for people who care for older Australians.
- Visit https://www.servicesaustralia.gov.au/ageing or call 13 23 00
- Centrelink – Information on Gifting
- If you give away your income or assets, they may still count towards your income and assets tests. This also applies if you sell them for less than they’re worth.
- https://www.servicesaustralia.gov.au/gifting
- Centrelink – Information on Granny flat interest
- A granny flat interest is an agreement for accommodation for life. It can affect your eligibility or rate of payment and we may include it in your assets test.
- https://www.servicesaustralia.gov.au/granny-flat-interest
Gifting
If an older person ‘gifts’ more than the sum allowed by Centrelink, it may reduce their pension entitlement (but see Granny flats for exceptions). Assets gifted above the allowed amount will still be included in the assets assessment for residential aged care and may lead to increased aged care accommodation fees.
Older people or their families sometimes try to divest themselves of property to avoid an aged care accommodation bond or to attract Centrelink payments. Attempts to do this often work to the detriment of the older person and you need to alert your client to the possible disadvantages.
Example: A mother transfers her house to her daughter. Her children are angry and fight about her supposed favouritism. Meanwhile she needs to go into aged care. The house transfer is made without advice from Centrelink who consider such a gift a transfer of assets for inadequate consideration. Centrelink treats the property as still being owned by the person ‘gifting’. This will affect the mother’s pension entitlement and aged care fees.
Granny flats
Centrelink’s ‘granny flat’ exceptions are designed to encourage people to stay out of supported care. They may, however, leave openings for financial detriment or abuse.
Assets transferred in return for a ‘right to accommodation for life’ can create ‘granny flat rights’ where the transfer of assets will not impact on pension entitlements. But Centrelink can apply a reasonableness test to the amount paid for a granny flat interest. If it is considered excessive, this may affect pension entitlement. See Centrelink FIS Fact Sheet on ‘Granny Flats’.
Each of the following scenarios can be considered ‘granny flat’ interests and so Centrelink may not alter pension entitlements for these arrangements.
Examples:
- Bryan transfers title of his home to his son while retaining the right to live in it.
- Mira sells her home and pays for the construction of a bungalow on her daughter’s property.
- Anna provides $50,000 to her son when she moves in with him.
Trying to maximise their pension entitlements through Centrelink’s recognition of granny flat rights encouraged Mira and Anna (above) to live with their adult child.
If they later wish to move out because they are unhappy, unwell, or inadequately cared for:
- Can they get their money back?
- Can they claim a property interest?
- What are the tax and pension repercussions?
- If they move into aged care, what effect does this new arrangement have on aged care costs?
Placing a parent in a granny flat then into aged care just a few months later is a strategy that has been used to try to circumvent Centrelink asset assessment and avoid an accommodation bond, but it will not work if the need for care could have been anticipated.
These matters need to be considered before your client enters into these arrangements. For example, you could assist your client to draw up a family agreement (see Family agreements) that could provide evidence of a life interest to help access this granny flat exception.
Reverse mortgage & home reversion
Your client’s pension entitlement may be affected by a lump sum received through a reverse mortgage or home reversion scheme.
(See Financial and tax implications.)
Nominees
A family member can be appointed as their older relative’s nominee for correspondence or for collecting their relative’s Centrelink payments. The completion of an authorisation form available from the Centrelink website is all that is needed for a person to act on another’s behalf.
These arrangements are usually voluntary and can be cancelled at any time by contacting Centrelink (unless the arrangement is legally enforced, for example, under an Administrator arrangement).
Carer benefits
Carer Payment provides income support to people who, because of the demands of their caring role, are unable to support themselves through paid employment. Carer Payment is income- and assets-tested and paid at the same rate as the age pension. It can be paid to a person providing constant care to a person with a disability.
Abuse of Centrelink payments is sometimes discovered or suspected by services that deal with financial abuse of older people. An adult child may be claiming a Carer Payment without providing adequate care.
Centrelink waiver
If your client has been deemed to have gifted property and has subsequently lost part of their pension, or has been assessed to pay a bond but has no money because they have transferred their house, you could write to Centrelink, advising them of what has happened and seek an exemption or waiver of fees.