Your clients’ family home isn’t counted as an asset if they live in it. However, their other assets are, such as their home contents, caravan or car.
- Most assets depreciate over time – especially things like cars, caravans and home contents that people tend to overvalue. This depreciation gives your clients an opportunity to increase their Age Pension. Many don’t realise Centrelink only requires a second-hand value, not replacement or insurance values which are usually much higher.
- A good rule of thumb is to estimate what they’d reasonably get for the item if they had to sell it today. Doing a quick search via an online secondhand market sites such as Gumtree are a good place to compare. Then consider how much the item would sell for (if it had to be sold).
- The higher the value, the bigger the impact on their Age Pension entitlement calculations. And while many believe Centrelink updates their asset values for them, that’s not the case for all types of assets. It’s worth noting that a valuation of home contents of $10,000 is used unless a client informs of a different amount.
- New cars are a great example – depreciating from the moment they’re bought. Failing to let Centrelink know could potentially cost your clients thousands in lost Age Pension in just a few years.
Case study: Every dollar counts
When Camilla retired and applied for the Age Pension she didn’t realise that she should be valuing her car and furniture based on what she’d get for them, if she had to sell them today on a website like Gumtree. Her valuations were based on insured replacement value.
Camilla bought a new car for $40,000 four years ago which depreciated as soon as she left the dealership.
Today, she’d be lucky to get $20,000 for it. Her personal belongings would cost a fortune to replace but aren’t much value to anyone else so she was able to depreciate their valuation from $60,000 to $10,000.
Because Camilla was receiving a part Age Pension (determined by the assets test), updating Centrelink on her car and home contents value added an extra $210 Age Pension entitlement per fortnight. That’s $5,460 more for the year. A nice cash injection just by updating her valuations.