Means Testing Strategies

Means Testing Strategies

By investing up to $13,000 in a Funeral Bond, your clients may reduce the effect of the income and assets tests, and thereby increase their Centrelink entitlements (pension or allowance).

This strategy also provides peace of mind as it sets aside money to pay funeral expenses. The client knows that the family does not need to find money to pay for the funeral if funds are not immediately available from the estate.

Due to the limitations on this strategy it may be combined with other asset reduction strategies to provide a greater benefit. 

 

Strategy Analysis

Funeral Bonds are excluded under the income and assets tests provided no more than $13,000 is initially invested in the bond. The client can hold a maximum of two bonds but the total investment cannot exceed $13,000. 

Any growth on an exempt bond is also excluded from assessment even if this takes the balance over $13,000. The threshold is indexed on 1 July each year.

 

The impacts from a Centrelink perspective are:

·         Assets are reduced by the amount invested in the Funeral Bond

·         Assessable income is reduced (if the money previously had an income assessment applied – eg the money was in a bank account).

The exempt status may help a client to qualify for a small pension or allowance or increase their entitlements.

Money can only be withdrawn from Funeral Bonds upon the death of the owner or life insured, depending on which type of Funeral Bond has been chosen. This money can be used to pay funeral expenses and any surplus is usually part of the estate.

Before investing in a funeral bond clients should be comfortable with the fact that they do not have access to this money. Clients should have access to sufficient capital in other investments.


The information contained in this publication is based on the understanding KeyInvest (ABN 74 087 649 474 AFSL No. 240667) has of the relevant Australian legislation as at the date shown in this publication.

The information contained in this publication is of a general nature only and is intended for use by financial advisers and other licensed professionals only. It must not be handed to clients for their keeping nor can any copies of sections of this publication be given to clients. KeyInvest is not a registered tax agent under the Tax Agent Services Act 2009. We recommend that your client be referred to their registered tax agent or legal adviser prior to implementing any recommendations that you may make based on the information contained in this publication.

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