Age pension planning for farmers
by Byll Swan Senior Consultant
This article will discuss the criteria for Age Pension and demonstrate that with good planning, almost any farming couple can introduce into the family income, an Age Pension of $10,000.00 to 11,000.00 a year, plus the valuable fringe benefits.
If you look at that, over perhaps a ten or fifteen year period, we are speaking of $100,000.00 to $165,000.00 additional income. Age Pension is subject to an Assets Test and an Income Test and whichever produces the lower pension prevails. The vast majority of farmers of pensionable age are subject to the Assets Test. The maximum Age Pension for a couple is $16,936.40 per year and it is payable only if a couple's assets (excluding the value of the home and five acres) is less than $189,500.00. For every $10,000.00 of additional assets the couple loses $780.00 per year pension, resulting in the pension "cutting out" where asset value exceeds $407,000.00. As an example, a couple with assets of $250,000.00 in value, plus their home, have a pension entitlement of $12,217.00 per year.
The present income cut off point for a couple is $47,242.00. Farming land is valued by the Commonwealth Government Valuation Office, free of cost. So if Age Pension is sought and the asset level (excluding the home) is higher than $407,000.00, assets must be disposed of and the manner of their disposal is the crucial element in the exercise. Expert advice from an experienced Farm Succession Planning Lawyer will ensure that the required asset disposal will be done in a way which will protect your long term financial security, and will protect the land against "the Three D's" (death, divorce or departure). An experienced Farm Succession Planning Lawyer will know the intricacies of the Social Security Act and Centrelink policies thoroughly. He or she will be able to advise expertly on a number of asset value reduction strategies which can in many instances, wipe off hundreds of thousands of dollars from the assessable value of assets and gain instant and significant Age Pension and the valuable fringe benefits
The Minister for Family and Community Services has recently announced proposals which she wants to implement, to take away the Age Pensions now being paid to thousands of elderly farmers and to prevent those farmers who have planned their affairs in ways which will allow them Age Pensions in the future, to be disentitled. She wants her proposals to be effective from 1st January 2002 and to apply retrospectively. Only advice from an expert Farm Succession Planning Lawyer will protect the rights of our senior farmers in regard to Age Pensions against this sort of attack on their rights as proposed by the Minister.