Comment
Act now on trusts — Over 50s
Lack of information about changes to the rules governing trusts may catch retirees unawares warns BRIAN SHAKES, chief executive officer of the Over 50s Association.
Pensioners who have arranged their affairs to take advantage of private trusts and companies only have until the end of this month (March) to relinquish control, or risk losing some or all of their pensions.
In some cases, the changes required are complex and expensive and, although the Government extended the original deadline from 31 December to 31 March, this may still not be long enough for people who may, for example, have to wind up a company.
Under the new rules, assets held in a private company or discretionary trust are no longer excluded from the pension asset test. For assessment purposes, the ‘controller’ of the trust or company is considered to be the owner of all the assets and income, even if they receive no direct payment.
The changes mean Centrelink treats the assets as if they were held directly. Consequently, some current pensioners are no longer eligible to receive the benefit, because even though they may meet the income test, they don’t pass the assets hurdle.
Those pensioners who are making changes need to consult closely with Centrelink, because they have strict rules about what constitutes a ‘pension-friendly’ investment and how assets can be shifted around. The current investment climate makes it difficult to convert trust-held assets into other forms of income-generation.
While the principle underpinning the Government’s rule change is about equity, the process is anything but easy.
