Passing a farm from one generation to the next may have a knock-on effect for older farmers planning to apply for the Age Pension in retirement.
Farmers wanting a steer on the complex rules governing pension payments can seek support from a Department of Human Services Financial Information Service Officer.
‘FISOs’ are experienced in social security payments and financial issues and, while not financial advisers, offer a free and impartial information service to anyone wanting to talk through their financial decisions.
FISOs based in regional areas, like Katrina Hockey and Trudy-Anne Doyle in Mount Gambier, South Australia, are also well-versed in financial matters that impact farmers.
Katrina says a topic commonly discussed with farmers approaching retirement is how succession planning can impact eligibility for Age Pension.
“Transferring a farm business to a child or someone else can have implications for people who may want to later test their eligibility for Age Pension,” she says.
“We really encourage people to speak to us about this topic early – years before retirement if possible – so they can get the information they need to make informed decisions about their future.”
Katrina explains that passing large assets to someone else may be taken into account under the Centrelink assets test.
“When a farmer legally transfers their property, including plant, stock and equipment to another person, including a close relative, Centrelink will generally apply the ‘gifting’ rule,” she says.
“Under this rule, any assets you or your partner give away, or transfer for less than their market value, are considered to be a gift and will start to affect pension eligibility when the value of that gift exceeds an allowable threshold.
“Singles and couples can gift up to $10,000 worth of income and assets per financial year, limited to $30,000 per five financial years. Any gifts over the threshold will be counted as an asset for five years and be deemed to be earning income.
“The cap on gifting applies to prevent people from giving away assets then relying on the community for support,” she says.
Trudy-Anne says older farmers with high value assets but limited income may be eligible for a concession to reduce the impact of gifting on pension eligibility.
“A concession we speak to farmers about is the forgone wages policy, which recognises the unpaid contribution relatives aged over 15 have made to the farm.
“It works by calculating a dollar amount for that contribution and then reducing the value of a gift by this amount.”
Trudy-Anne says the gifting rule and forgone wages policy are just two elements of social security policy that FISOs can help clarify for farmers approaching retirement.
FISOs can also help with financial matters outside of social security, like superannuation, financial products, debt and how to maximise overall income in retirement.
She says building farmers’ knowledge and confidence on financial matters is both the key focus and joy of her role.
“As a FISO, I often have a lot of one-on-one contact with people and am able to get a deep understanding of their financial concerns and goals,” she says.
“The upshot is I can have a really meaningful impact on how they shape their future because I can give them those missing pieces of information about how their finances could be improved.
“And it’s not just about answering Centrelink questions, we can help anyone in the community with managing their finances.
“I remember helping a woman several years ago who was on the brink of losing the family home. She had separated from her husband, had four children and was working part-time.
“She was very distressed when I first spoke to her but I was able to go through a variety of lending options that could help. She contacted me a few weeks later to say that information had led to her being able to keep the house. She was overjoyed.”
- To make an appointment with a FISO in your area call 132 300
- Read more information about the Financial Information Service