A common question from families transitioning a loved one into aged care centres on asset declaration, particularly about the family home and jointly held assets. Families often feel uncertain about what must be declared for the aged care fee assessment.

In general, the family home is exempt from assessment if a spouse continues to live there or if there is another ‘protected person,’ which may include:

• a carer who has lived in the home for at least two years prior to the resident’s entry into care and is eligible to receive an income support payment (eg Carer Payment), or
• a close relative who has lived in the home for at least five years before the resident moves into care and is eligible for an income support payment (eg Age Pension, JobSeeker, or Disability Support Pension).

Other assets, whether in Australia or abroad, owned individually or jointly by the person or their spouse, need to be declared. This requirement also extends to income. Many people are unaware that the obligation to declare assets and income continues beyond the initial assessment and that future changes, including Refundable Accommodation Deposit (RAD) payments, must be disclosed.

For Age Pension purposes, the family home remains exempt as long as the spouse lives there, extending up to two years after the spouse leaves. After this period, it is assessed based on its net market value. However, for aged care purposes, the two-year exemption does not apply, and the former home becomes an assessable asset, up to a capped amount, as soon as the spouse leaves.

Some common asset assessment scenarios

When the sole occupant moves to a care facility:

If a person living alone enters permanent residential aged care, the net market value of their family home is assessed up to a capped maximum amount. If the property is retained, its value is only assessed up to the capped amount for the aged care asset test. If the former family home is subsequently rented out, the net rental income becomes assessable under the aged care income test.

When a spouse is living in the home

If one member of a couple enters permanent residential aged care while their spouse remains at home, the family home is exempt from the aged care means test during this time. However, if the spouse vacates the home or also moves into residential care, the family home becomes assessable under the aged care means test, subject to a capped maximum amount.

When a carer in the home is eligible for an income support payment

If a carer has lived in the home for at least two years before the resident entered care and qualifies for an income support payment, the home may be exempt from the aged care means test assessment.

When a close relative is eligible for an income support payment

The exemption rule for the family home under the aged care means test also applies when a resident is living with a close relative who has resided in the home for at least five years before the resident enters care and is eligible for an income support payment.

We’re here to help, every step of the way

Aged care finances can be complex, so it’s important to understand your options and how they relate to your family’s situation. If you’re unsure about your current situation or how asset assessments may impact your care situation moving forward, our advisers can put you in touch with Alteris’ Lifestyle and Care team.

Alteris’ team of specialist financial advisers are here to assist you in navigating these rules and making informed choices that consider both immediate and long-term outcomes. They can can also provide full support with ensuring the fees and pension are correct by working directly with your accommodation provider, Services Australia and the relevant government departments.

Learn more about Alteris Financial Group’s accredited aged care financial advisers.

Self-managed super funds (SMSFs) can offer their members many benefits, but one that’s often overlooked is their potential as a multigenerational wealth creation and transfer vehicle.

Family SMSFs are relatively rare. According to the most recent ATO statistics (2022-23), the majority of SMSFs (93.2 per cent) have only one or two members. ⁱ  Just 6.6 per cent have three or four members, and only 0.3 per cent have five or six members (the maximum allowed).

Advantages of a family SMSF

An SMSF is sometimes established when two or more generations of a family share ownership or work in a family business. The fund can then form part of a personal and business succession plan, potentially making it easier to pass on ownership and management of assets to the next generation.

With more members, SMSFs also gain additional scale, allowing them to invest in larger assets, such as property. You can add business premises to the SMSF and lease it back without violating the related parties rule and 5 per cent limit on in-house assets. ⁱⁱ

Reduced tax and administration costs are also benefits of multigenerational funds.

Running a family SMSF means the costs of establishing and administering the fund are spread across more members. This can be particularly helpful for adult children who are beginning to save for retirement.

In addition, more fund members mean more people to share the administrative burdens of running an SMSF, which may be helpful as you get older

A family SMSF does not need to be automatically wound up if you die or lose mental capacity, and it can simplify the process of paying out a member’s death benefit, potentially allowing it to be paid tax-effectively. Note that death benefits paid to non-tax dependent beneficiaries incur a tax rate of up to 30 per cent, plus the Medicare levy. ⁱⁱⁱ

More fund members also make setting up a limited recourse borrowing arrangement (LRBA) easier because their contributions reduce the fund’s risk of being unable to pay the borrowing costs. (An LRBA allows an SMSF to borrow money to buy assets).

Funding pension payments

Another advantage of an SMSF with up to six members arises when the fund begins making pension payments to older members.

If younger members are still making regular contributions, fund assets don’t need to be sold to make pension payments, which helps avoid the realisation of capital gains on assets.

Family SMSFs can also provide non-financial benefits by facilitating the transfer of financial knowledge and expertise between generations. While your children gain a solid financial education from participating in the management of the SMSF, they can also offer valuable investment insights from a different perspective.

Risks and responsibilities

It is important to note that a multigenerational SMSF may not be suitable for everyone.

SMSFs of any size come with certain risks and responsibilities. You are personally liable for the fund’s decisions, even if you act on the advice of a professional, and your investments may not yield the returns you were hoping for.

Before you start adding your children and their spouses to your fund, it’s essential to consider the challenges of running a family SMSF. Developing an asset allocation strategy that caters to different life stages can be complex. Older members may prefer a strategy designed to deliver a consistent income stream, while younger members are typically more focused on capital growth.

Risk profiles are also likely to vary. Generally, younger fund members have a higher appetite for investment risk than those closer to retirement.

Family conflict can also arise when relationships are strained due to divorce, blended families, and personality clashes.

The death of a parent can also create disputes over the distribution of fund assets or forced asset sales. Decisions about the payment of death benefits by the remaining trustees can derail carefully made estate plans and result in expensive legal battles.

Larger families with multiple adult children and partners may also find the six member limit an obstacle, forcing them to look at other options such as running several family SMSFs in parallel.

The process of choosing the best approach for a self-managed superannuation fund depends on your financial situation and goals,

Whether you’re already working with us or just starting to explore your options, we’re here to help. If you’re an existing client, reach out to your adviser to discuss your next steps. If you’re new and looking for guidance, our experienced advisers are ready to answer your questions and help you take the first step toward achieving your financial goals.

Let’s start the conversation today.

Sources

 i SMSF quarterly statistical report June 2024 | data.gov.au

ii Related parties and relatives | Australian Taxation Office

iii Paying superannuation death benefits | Australian Taxation Office

For many Australians approaching retirement, the idea of stopping work completely is becoming less appealing. Instead, the trend is shifting towards making work optional, giving those nearing retirement age the freedom to decide how much (or how little) they want to work. Whether it’s through part-time work, freelancing, volunteering, or pursuing a hobby-turned-business, the goal is often to maintain a sense of purpose while enjoying the flexibility that retirement provides. This article explores some of the important considerations to help make this lifestyle work for you.

Think about when you want to make work optional

There’s no set age to stop working; it will depend on your health, work options, finances, and personal circumstances.

Are you looking at making work optional in ten years, two to five years, or next year? If you have a partner, when will they stop working? Knowing how much time you have makes the planning process easier.

Discuss your priorities with your partner a colleague or friend. If you need professional advice to determine your timeline toward an optional work lifestyle, our financial advisers can assist.

Consider your lifestyle and priorities

Set your priorities

Making work optional requires a clear understanding of your financial situation and what you want your life to look like during this period.

Consider:

• your living costs
• social life and recreation
• staying active and healthy
• volunteering or community participation
• planning for changing health needs or aged care
• supporting your family, children or grandchildren (if any)

Keep working, reduce hours or retrain

Continuing to earn an income, even part-time, can help maintain a sense of purpose and make your savings last longer. If you decide to keep working, options include:

• Job Switch — explore options to retrain or seek part-time work
• Transition to retirement — if you’ve reached your preservation age, you can use some of, and keep contributing to your super while working
• Work Bonus — if you get the Age Pension, you can earn up to $300 per fortnight from work before your pension payment reduces.

Plan where you will live

If you own your home:

• If you still have a mortgage, you could use some of your super (when available) to pay it off.
• Consider downsizing to free up money. You could pay off your mortgage, support your lifestyle, or relocate to be closer to family or services. Before going ahead, check the tax impact and whether it will affect your government benefits.

If you’re renting:

• You may be eligible for an extra payment if you rent and get payments from Centrelink, like the Age Pension. To find out more, see rent assistance on the Services Australia website.

Work out your income and living costs

How much money you’ll need for living costs, once moving to an optional work lifestyle, depends on your priorities and what you can afford.

For many people, their income will be a combination of superannuation and the Age Pension. If you don’t have a large super balance, you may be more reliant on the age pension. If you do have a larger super balance, think about how and when to withdraw it. You may also have extra savings or investments that can be used to fund living costs.

Work out your living costs

• Housing — rent or mortgage, rates, home and contents insurance, maintenance
• Utilities — electricity, gas, water, phone, internet, streaming services
• Food — fresh food, groceries, takeaway, dining out
• Clothing and household goods — clothing, personal care, furniture, household appliances
• Health and leisure — health insurance, health care, social activities, fitness, holidays, gifts
• Transport — car registration, insurance and running costs, public transport

As a rule of thumb, try allowing for two thirds of your current living costs. This is a useful guide, that assumes reduced costs for work and that you’ve paid off your mortgage.

Your spending may be higher when you first retire. For example, if you plan to travel or update your home. You may also need to allow more *income to be spent on healthcare as you get older.

Get your super income

You access funds within your super upon retirement or once you reach your ‘preservation age’. Which is between 55 and 60, depending on when you were born.

When you are eligible to withdraw your super, your main options are:

• an account-based pension
• an annuity
• a lump sum
• or a combination of these

You could also consider a transition to retirement strategy. This provides the option for individuals to use some of, and keep contributing to, your super while working.

Claim government benefits

From age 67 (or earlier, if born before 1957), you may be eligible for government benefits such as:

• Age Pension
• Pensioner concessions
• Health care benefits
• Tax offsets

As mentioned previously, if you decide that you want to continue to work while also receiving the Age Pension, you can earn up to $300 per fortnight from work before your pension payment reduces.

Add in savings and investments

If you have money in savings, you could use this to top up your retirement income, which will aid in making work optional for you.

If you have investments like shares or an investment property(s), think about whether to keep or sell. Check the costs, tax impact and whether it will affect your government benefits.

Seek professional advice

At The Investment Collective, our financial advisers are here to help you build a clear plan tailored to your lifestyle, goals, and financial situation. We understand that every step counts, whether it’s deciding when to reduce work hours, accessing superannuation, or maximising government benefits.

If there is anything in particular you would like to discuss, please don’t hesitate to contact our team.

It’s the last month of spring, and with summer on the way, many people are preparing for Christmas and the holiday period.

At its latest meeting, the Reserve Bank of Australia left interest rates unchanged at 4.35%, citing persistently high underlying inflation of 3.5% for the September quarter, which remains above the RBA’s 2.5% target midpoint. This suggests rates are likely to stay elevated for some time, offering little reprieve for mortgage-holding households. The Consumer Price Index rose just 0.2% in the September quarter and 2.8% over the twelve months to the September 2024 quarter, marking the lowest rate in just over three years. Prices fell slightly for alcohol and tobacco, clothing, housing, health, and financial services. Transport costs also fell for the first time since 2020.

Share prices softened during the last two weeks of October, recording the worst monthly performance in six months. The S&P/ASX 200 closed down by 1.31% for the month, after reaching record highs again mid-month.

The Australian dollar ended the month at 65.7 US cents after almost hitting 70 US cents just a few weeks ago. Investors reacted to weaker-than-expected Australian retail sales and stronger US unemployment and retail sales figures.

Iron ore has hit a one-month low at USD 104.08 after the heady highs in January of almost USD 145. All eyes are on meetings in China this month about expanding its stimulus measures. However, post meeting, the stimulus disappointed investors with many investors believing China is keeping its tactical powder dry in play as the Trump-China tariff negotiations build.

Back over in the US, after a long and hard-fought campaign, the US Election finally concluded. Leading up to polling day, it was expected to be a tight race, but the Don (Donald Trump), managed to pull off a historic White House comeback in emphatic fashion. While the future may hold more uncertainty, shorter term US equity markets rejoiced, with the S&P 500 (+2.53%), Nasdaq (2.95%) and Russell 2000 (small cap representative, +5.84%) all surging post the election result. President elect Trump’s policies of supporting lower corporate tax rates, deregulation and industrial policies that favour domestic growth were all positive for the stock market. Kamala Harris was graceful in defeat and highlighted the “importance of a peaceful transfer of power and being a president for all Americans,” Longer term implications are yet to be felt. Mr. Trump’s policies are more inflationary e.g. imposing very high tariffs (e.g. 60%) on China and maintaining larger budget deficits is likely to have a ripple effect to Australia’s trade. Adding other uncertainties such as climate change policy (e.g. backing fossil fuels) and global trade war with China creates an uncomfortable environment.

If there is something affecting your financial situation that you would like to discuss, please do not hesitate to reach out to our team.