Your car and your retirement:
Five things it helps to know
At Retirement Essentials we consider ourselves lucky to have a ‘secret sauce’ when it comes to the detail of maximising your retirement. Pardon the pun, but you could in fact call our secret sauce, a great source of information and tips. And this is our very own Steve Sadler, who heads up the Customer Services Team.
Something Steve knows in deep detail is the rules around your car and your retirement income – particularly those relating to Centrelink.
So today he shares his top five insights to help you understand what you may need to do today – or in the future, to ensure your car doesn’t prevent you from maximising your hard-earned savings.
How does Centrelink use my car’s value to determine my income?
The Age Pension entitlement is based upon two different thresholds – income and assets. But some of your assets are also ‘deemed’ to earn income and so they may be viewed in two ways at once by Centrelink.
Your car is an asset. Unlike your primary residence, it is not exempt from the assets test. It is, however, not deemed, so there is no income attributed to this asset.
What does this mean in plain English? It means that if you are close to the assets threshold, the value of your vehicle/s could mean you are eligible or not. Ensuring that the stated value of any and all vehicles is 100% up to date and accurate is therefore the first rule of retirement and cars.
What is current market value?
The value of your vehicle means different things to different people. There is the purchase price. Then the depreciated value according to its age and condition. There is the replacement value according to an insurer, which may or may not be the amount for which you choose to insure it. Confused? Don’t be. For Age Pension entitlement purposes, the current market value is the critical valuation. This can be ascertained by checking your make and model (and condition) on www.cars.com.au or by using the Redbook site. Centrelink will not send someone to check your car, but it is important you report an accurate value. This can be done, if you are already eligible, by going to Centrelink via your MyGov account. It is important for you to update this value as the vehicle depreciates – Centrelink will adjust your super balances automatically, but this is not the case with your car. Sometimes a re-evaluation can make the difference between eligibility and not – as was the case with Tom and his much-loved Corolla.
What do I need to do if I purchase a new car?
Again, if you already receive a full or part Age Pension, you need to inform Centrelink. This is where the money trail matters a lot. You will need to supply the invoice or receipt for your vehicle (even if second-hand) and show where the money came from. You need to update this information within 14 days of taking ownership of the new vehicle. It’s a little frustrating that Centrelink will value a brand new car at showroom prices (i.e. as shown on your invoice), when it will lose value dramatically after leaving the showroom floor. You may wish to ascertain the depreciated value a few months after taking possession, and then readjust the amount on your asset list using MyGov links to Centrelink. Those not yet on a pension will still benefit from keeping an accurate money trail as these records are helpful if and when you do need to apply.
And what of your old car?
Again, Centrelink has a strong interest in how you dispose of your previous vehicle. If you sell it, you need to show what you have done with the proceeds (i.e. increase to savings account or other investments). If it was a trade-in this will be clearly detailed on the invoice. If you choose to keep it, the new car will be an extra asset – the older one will stay on the register as well. If you give it away, then you are ‘gifting’ and need to obey all gifting rules. Gifting is allowed, up to $30,000 over a period of five years. It’s best to know how this works, however, so you don’t inadvertently threaten your entitlements in the meanwhile.
And what’s a vehicle? Is this information just for cars?
As it sounds, a vehicle, when it comes to Social Services’ eligibility, can be a car, a caravan, boat or motor bike – even a homemade box trailer. They are all assets of some value according to Centrelink.
And don’t forget, if you are on the Age Pension, you will have a Pension Concession Card which means you will most likely get a discount on vehicle registration. This is a significant amount of money, so make sure you receive this concession if you are entitled to it.
At first glance, it is reasonable to assume that self-funded retirees do not need to worry about the Services Australia rulings regarding vehicles. But given that 80% of Australians will be receiving an Age Pension by the time they reach their 80s, keeping accurate records of all vehicle transactions will make your application all the easier if and when it’s needed.
Knowing the rules on entitlements is key to making sure you maximise your income. It’s not just the rules on vehicles that can cause concern. So if you are unsure about your current or future possible entitlements, why not visit the Retirement Essentials Age Pension Eligibility Calculator and set your mind at rest?