Company Loan
Mary’s Story: How Private Company Loans Can Affect Your Age Pension Application
Mary was referred by her accountant after she was rejected based on the assets test but common sense told them that they did not exceed the assets test. So what went wrong?
Mary had applied for the pension around 5 months before.
Her situation was not simple as her partner had a private company which he had established when he purchased a business many years ago. While the business no longer existed the company still did as did the substantial loan that her partner had made to the company to buy the business in the first place. While the loan could never have been repaid by the company, it remained on the company’s balance sheet.
Mary’s application for the age pension was rejected based on the combined assets of the couple been over the assets test threshold.
After determining that the loan to her husband’s company was responsible for putting Mary over the assets test threshold, we investigated ways that the loan could be excluded from the assets test. After working closely with Mary’s accountant, it was agreed that Mary’s husband would forgive the loan to the company ie the loan no longer existed.
Because the company was considered a ‘controlled company’ for Centrelink purposes, forgiving the loan was not considered deprivation of an asset.
Of course, there were tax implications of this strategy which had to be considered which is why it was so important to have the accountants involved when deciding which, of the recommended strategies, to implement.
Updated information was then provided to Centrelink to support the original application. As this information was provided within 13 weeks of the original rejection letter, it was considered a continuation of the original claim.
The claim was then accepted some 3 months later and the pension payment was backdated to the original application date. In total 11 months of pension payments were paid as a lump sum and Mary received fortnightly pension payments for several years.
Please be aware that this is just a snapshot of the information available on this client’s story and you should not make any decisions based on this article without seeking further advice about your individual circumstances.
Key outtakes from Mary’s story include:
If you are involved in a private company or a private trust, seek advice before making your application for the age pension!
Combining the specialist knowledge of your accountant with the specialist knowledge of My Age Pension will give you the best possible outcomes!