Seniors with Account-Based Pensions (ABPs) are losing the health card because of the extended deeming revisions now applied to superannuation account-based pensions.
These changes to deeming are causing a rethink of how assets are held for people who are close to receiving the Commonwealth Seniors Health Card (CSHC).
Money held in an insurance bond does not generate assessable income and therefore does not contribute income to the assessable amount of those applying for the health card.
Under the new rules many people with account-based pensions may find that the deemed income is pushing them over the income threshold and excluding them from gaining the CSHC.
Why?
For example, a homeowner who took out a superannuation account based pension of $300,000 in 2015 is deemed by the government to earn $9,021 in income and this newly-assessed income figure is causing some pensioners to lose their CSHC.
Insurance bonds do not generate assessable income and tax is paid inside the structure.
Some Insurance Bonds can pay an income stream to the owner that is made up of capital and a growth component. Only the ‘growth’ component of the payment is assessable for tax and/or CSHC purposes. Plus a full 30% tax offset is applicable to the income component.
This can mimic many features of an ABP without the ‘deeming’ issue. After 10 years, withdrawals from bonds are ‘tax free’. Insurance bond income streams are also not subject to minimum and maximum payment limits, can be stopped and started with ease. Unlike ABPs, bonds can accept further contributions at any time. Bonds are useful for inheritances or surplus cash when downsizing for example.
A modern Insurance bond offers a range of investments from a portfolio of ‘Tax-Paid’ Term Deposits through to a menu of mainstream managed funds that covers all investment sectors.
Media enquiries
Richard Atkinson
Head of IFA Product and Relationships
Austock Life Limited
03 8601 2095 or 0417 541 897
e RAtkinson[AT]austock.com
w www.austock.com