Page 11 - Understanding Aged Care
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UNDERSTANDING AGED CARE
What are the tax implications? From 1 July 2019 Flexible Income (Immediate
payments), Flexible Income (Deferred payments),
The tax treatment of an annuity usually depends Enhanced Income (Immediate payments) and
on whether you purchased the annuity with Enhanced Income (Deferred payments) will be
ordinary or superannuation money and the assessed as follows:
relationship between the purchase price, term
and residual value of the annuity. Assets test Income
The annuity income will be assessable income. 60% of the investment
However, if it is a lifetime annuity or has an amount until age 84 60% of the regular
RCV less than 100% this is reduced by a tax (minimum of five years). payments received*.
deductible amount which represents the portion 30% of the investment
amount thereafter.
of each payment that represents part of the
capital purchase price returned to you. This is general information only, and we recommend
you get advice regarding your individual circumstances.
Annuities purchased with superannuation Your local Centerlink or Department of Veterans’ Affairs
money are tax-free from age 60 or have a 15% office can help answer any question you may have.
tax offset applied at younger ages (assuming Your financial adviser can also help.
paid from taxed sources).
What are the Centrelink / What are the Estate planning
DVA implications? implications?
Annuities are assessable under the Centrelink/ If you nominated a reversionary beneficiary, the
DVA income and assets tests. This strategy annuity income payments will continue to be
explanation applies to annuities purchased from paid to that person for the rest of the term or
1st July 2019. Further assets test concessions their lifetime.
may apply to certain annuities purchased before
that date. If instead you just nominated a beneficiary,
the annuity is cancelled and the current asset
From 1 July 2019 value (less any exit fees) is paid as a lump
sum. A beneficiary can be a person or the legal
New means testing rules apply to an Annuity representative of the estate however, some
that commences on or after 1 July 2019. annuities may only allow the legal representative
Grandfathering provisions will apply to Annuities to receive the funds.
that commence prior to this date meaning
that they will continue to be assessed using a Nominating a beneficiary or reversionary may
deduction amount (as explained above). help to keep the annuity away from estate
disputes. If the legal representative has been
nominated the annuity value is distributed in
accordance with the provisions of the Will.
Any income component paid to a beneficiary,
reversionary or estate is taxable income to
that entity.
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