Leigh Mansell, director SMSF technical and education services for Heffron, said in a recent technical update, that under the amnesty, Centrelink will now waive any debt.
“This is for those that have got clients with the good old legacy pensions, and they’ve been hanging out waiting for the debt waiver. [These clients] are an aged pensioner, and their legacy pension is assets-test exempt, and they’d like to get out but were concerned about being reassessed over the previous five years and have had a debt in relation to previous payments,” Mansell said.
“We are now in a position where these clients can safely commute their assets-test exempt legacy pensions under the amnesty and Centrelink would waive any debt.”
However, Mansell warned it is best to be cautious because as soon as money is moved out of being assets-test exempted, it moves into a different “world” where it would be assets tested and income tested, regardless of what the clients may do with the commutation proceeds.
“If they’re going to stick it in an accumulation account or take it out and invest it in their own name, you’re going to have a financial asset for those particular age pension asset and income tests, and also potentially for their aged care tests as well,” she said.
“And once you’ve made the move, you can’t go back. One of the things that we have spoken to a couple of our clients about who have been waiting on this debt waiver to come to life, is that we have directed them to an officer at Centrelink to talk to because we’re not Centrelink experts.”
She added that clients in this position have been concerned about the ramifications if they do commute, and how it may affect their age pension.
“We’ve basically said here’s some numbers that you need to take to Centrelink. Go and have a chat with them,” she said.
“Centrelink has been quite useful in telling them how much their age pension would go down and what would occur. So, again, just be careful if we’re talking to clients about that. However, it is a goer now for those ones that have been hanging on.”
