“I own my home outright and I am receiving $812.58 per fortnight, while living with my 59-year-old non-pensioner partner who is not working. I have been turning a good profit on short-term trading lately. My question is how do I best deal with these profits?
I would love to be able to consistently trade at a greater rate than the pension and not receive the pension but what happens if the trading turns to losses? Should I start a MYOB account for this purpose and treat it as a business and present it at tax time? Or should "profits" and losses be reported fortnightly?"
-Question from Peter in Hyland Park, NSW
Top answer provided by:
Dishna Wijenayake
Hi Peter,
Short-term share trading can be risky and unpredictable. This is due to market volatility. You mentioned your current shares/ETF portfolio returns fluctuate between -$500 to $500 weekly. This is a clear example of how volatile your returns can get when investing with a short-term focus. When markets are doing well your profits are magnified. Similarly, when markets are performing badly your losses would also be magnified. If you don’t need to use these profits, reinvesting them might be a possible option. As your partner is under the Age Pension age, directing any excess cash to her super might also be a possible option if you don’t foresee a need to access this excess cash in the short to medium term.
MYOB does offer products to help manage share portfolios by recording share trades and dividend payments. This might assist you with keeping track of your trades. Whether you should set up a business to carry out your share trading activities would depend on your overall tax position. Your Accountant would be the best person to advise regarding this.
Services Australia uses two means tests to calculate the Age Pension. Apart from this, to calculate income earned from financial assets, a deeming rate is used.
Asset Test
Your primary residence is exempt from the asset test. All other financial investments are assessed. This includes your super. All assets both personally owned and jointly owned are assessed apart from the partner's superannuation if he/she is under the Age Pension age. Financial investments include investment properties, shares/managed funds/ETF, cash in savings accounts, term deposits, gold/silver/platinum bullions, income streams, bonds etc.
You are assessed under the partnered homeowner category. At present the lower asset limit for this category is $451,500 and the upper asset limit sits at $1,003,000. Your pension will reduce by $3 for every $1,000 over the lower limit until you reach the cut off limit.
Income Test
As a member of a couple, you can earn up to $360 a fortnight (combined) without impacting your Age Pension. Your pension will reduce by 25 cents for every dollar over $360 until you reach the cut-off limit. The cut-off rate applicable to you is $3,666.80 fortnightly (combined). Please note above limits are based on current Centrelink rates and are subject to change.
Deeming
Deeming is a method used by Centrelink to work out income from financial assets. It assumes that your financial assets earn a set rate of income, irrespective of what they really earn.
As you are assessed as a member of a couple, the first $100,200 of your financial assets has a deemed rate of 0.25%. Anything over $100,200 is deemed to earn 2.25%. Deemed income from financial assets will be recorded under the income test.
Therefore, irrespective of what your current shares/ETFs portfolio or other financial investments return, Centrelink will apply their deeming rate as shown above.
I recommend consulting a financial adviser for a more comprehensive assessment of your current position. A financial adviser would be able to analyse your current position to gauge if you can get a better outcome as well as align these with your future goals.
Kind Regards,
Dishna Wijenayake
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
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