Norm has shares purchased through an equity loan account and wants to know how they are assessed by Centrelink.
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Q. Norm
Are shares that I purchased using an equity loan account included as an asset in determining my assets for the Age Pension? Wouldn’t the amount be assessed as a loan? As such, should it not be considered an asset until I realise a profit? Would really appreciate if you could offer an answer to my question.
A. As long as the security for the lending is shares, and there is no lending against your principal place of residence, then there is a clear relationship between the asset (shares) and the loan. As such, the asset value can be reduced by the amount of the loan for Centrelink assets test purposes.
Borrowing to invest is not for the faint-hearted. The more you borrow, the greater the risk, as you have to repay the loan regardless of the performance of the investment.
Borrowing to invest only makes sense if the investment return (after tax) is greater than all the costs of the loan, such as interest and fees. If not, you are taking on a lot of risk for an overall low or negative return.
It is important to get independent financial advice when you are investing. If an adviser is connected to a company that they recommend you invest in, this investment may not be best for you. You can look at your adviser’s financial services guide to see any relationships or associations they have with other companies.
Have you ever borrowed money to invest? Did the strategy work out? Would you recommend it for others?
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Related articles:
https://www.yourlifechoices.com.au/age-pension/news/were-pensioners-unfairly-denied-pay-rise
https://www.yourlifechoices.com.au/government/centrelink/selling-property-and-the-age-pension
https://www.yourlifechoices.com.au/finance/seniors-finance/pension-loans-scheme-explained
Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.
