Undrawn Line of Credit
Fiona’s Story: Resolving Age Pension Issues with Undrawn Lines of Credit
Fiona was referred by her solicitor after she mentioned that something has gone wrong with her pension benefit but she did not know how to sort it.
Fiona was receiving the age pension but knew there was something wrong as the amount she was getting was only a small portion of the full age pension when she thought she should be entitled to the full pension.
Fiona had an investment property worth around $550,000 which she was renting out. There was a debt on this property of $300,000. She also had an offset account of $300,000.
For assets test purposes Centrelink were assessing the net property value at $250,000, the offset account at $300,000 plus personal assets at $150,000 giving her total assets of $700,000.
Fiona decided to use the funds in the offset account to pay down her loan on the investment property and advised Centrelink of this change. She did not ask for the receipt number of the conversation for her records.
For assets test purposes Centrelink should now have assessed Fiona on the net property value at $550,000, plus personal assets at $150,000 giving her total assets of $700,000 but their records were never updated. As her total assessable assets did not change, the fact that the records were not updated was not detrimental to Fiona at the time.
About a year later, Fiona decided to move into the investment property making it her principal place of residence.
She contacted Centrelink to advise them of the changes but in doing so, she was asked if she still had the $300,000. When Fiona advised them that she did not have the $300,000 they asked her what had happened to it. When she explained she used it to pay down the line of credit a year before, she was challenged. If she has not had the money all this time, why didn’t she update Centrelink before this.
She was then asked if she could still access the money. She explained that as the line of credit was still open that she could. The Centrelink officer advised her as she could still access the money then it was still an assessable asset.
For Assets test purposes Centrelink were now assessing her on the $300,000 (which did not exist) plus her personal assets of $150,000 giving her total assets of $450,000.
My Age Pension, acting as a Correspondence Nominee for Fiona, immediately corrected Centrelink’s records resulting in Fiona accessing the full age pension. Our request that Fiona’s payment at the full age pension rate be backdated to the date that Fiona moved into the investment property was rejected based on Fiona’s failure to provide the correct information at the time.
We immediately lodged a formal appeal providing evidence that the correct information was provided to Centrelink at the time and that it was Centrelink who failed to update their systems correctly.
Strangely, Centrelink made a back payment to Fiona but no explanation was ever given as to why. My Age Pension was then asked nicely to withdraw the formal appeal!!!
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 Fiona’s story include:
The client service officers who answer the phone do not necessarily understand complex financial arrangements.
Centrelink do not like formal appeals. In fact, they try very hard to make them go away. If you have a good case, don’t be shy in lodging one.
Keep a record of every conversation that you have with Centrelink and get a receipt number every time.