Money

Why are pensioners being cut off by Centrelink?

Bob Lamont is director of Corporate Accountants at the Night Owl centre in Gladstone.
Bob Lamont is director of Corporate Accountants at the Night Owl centre in Gladstone.

"ACCOUNTANCY is not rocket science," I heard myself say.

"It's just a journal, a story told in figures."

The occasion was a request by an associate of my firm, a financial planner, who was trying to make sense of a Centrelink interpretation of what caused his octogenarian clients to lose their age pension.

The story was simple. These people had an old company that had considerable tax losses. The losses were the result of a combination of poor trading results and some crook investments that took a beating during the 2007-8 global financial crises. That would sound familiar to anybody who had investments in super, Storm Financial or the many mini-Storms that were around at the time.

The point is that if the company had losses, it owed money to its shareholders, who had propped it up. Centrelink apparently understood this tenet in accountancy and assessed the loans as assets, reducing these people's pension entitlements. Not that there seemed much chance of the company repaying them!

But along came a white knight whose trust had made a tidy profit. Our knight legitimately distributed money to the company enabling it to repay the loans. Naturally this generosity was feathered somewhat by the tax saving on offer, but what he gave the company was fair dinkum, hard cash.

So what did Centrelink do? They assessed the distribution as income in the hands of the couple. What had previously been assessed as a loan to the company had morphed into income, slashing their pension to nothing.

The bottom line is that, in accounting parlance, the existence of the debt was the key element. The distribution of cash was to the benefit of the company, not the shareholders. What happened was that the company was subsequently put in a position to repay the debt that had been in its accounts since 2008 and it did so. The asset had changed from debt to cash - simple. Its assessment should not have changed.

As I said earlier, accountancy is just a story in figures. It seems, however, too often people make life-changing decisions but just don't have the know-how to read the story properly - Centrelink officials, tax officials and bank johnnies come to mind!

Bob Lamont is director of Corporate Accountants at the Night Owl centre. He welcomes your questions to boblamont1947@hotmail.com

Topics:  bob lamont, centrelink, opinion




Downs jobseekers are struggling to find jobs, despite effort

Pouwaka Ruwhiu

Ten-month campaign to find employment leaves Warwick man frustrated.

Killarney police recommend taste-testing blitz

Sergeant Brad Doyle and Daphne Cullen had the huge task of judging the annual KIllarney State School biscuit making competition.

Killarney police judge school biscuit making competition

New business all set to open in Warwick

WATER WISE: Manager and part-owner Chris Green outside the soon-to-be Warrego Water Warwick store.

A brand new business is moving into the Warwick CBD

Latest deals and offers

Gladstone couple's spontaneous Gympie Muster wedding

Craig Oglesby and Brenda Strong celebrate their wedding at the Gympie Muster with punters in front of the Main Stage.

The Gympie Music Muster was the perfect place for a wedding.

Australian Survivor's Peter: I'm no quitter

Australian Survivor contestant Peter Fiegehen.

ILLNESS forces castaway's early exit from Samoa.

Diva's sister on soliciting charge

FILE - In this May 14, 2016 file photo, Mariah Carey attends the 27th Annual GLAAD Media Awards, in New York. Carey will appear on the Oct. 5 episode of the Fox series, \"Empire,\" the network confirmed Monday at a TV critics bi-annual press tour. (Photo by Charles Sykes/Invision/AP, File)

Mariah Carey's sister has been arrested on charges of prostitution.

Tom Cruise private jets his gym kit around the world

Tom Cruise

Tom Cruise charters private to take his gym kit around the world

Movie behind Depp and Heard split to be released

Soon you'll be able to see the movie that ended the marriage

Bindi's boyfriend helps release huge croc

Chandler (far right) helped the jump team.

Chandler Powell helps catch Duncan the croc

Warning for unit investors with price plummet prediction

The warning signs are flashing for one real estate sector in 2017 despite others performing the best they have in years and it's not going to be pretty.

One real estate sector looks set for a rocky 2017

REVEALED: Pat Rafter's $18m Coast house on the market

Check out the photos of the Coast's most expensive property for sale

The "correction we had to have" in Gladstone's rentals

UPWARD MARCH: The rental vacancy rate in Gladstone has improved for the first time in more than a year, providing a confidence boost in the market.

Vacancy rates improve with signs that things are getting betterF

ISLAND FOR SALE: Cheap Fraser Coast island drops price again

Suna Island in the Great Sandy Strait will be auctioned by Ray White Hervey Bay on Saturday morning.

This is the cheapest island you will find for sale in Australia

How a family home can fit on a 250sq m block

This is what you can build on 250m2.

Here's the floor plan of a home built on 250sq m

$100m plan for Curtis Island 'world class' luxury resort

$100 million resort: Top views at Turtle Street at Curtis Island.

"At the moment we think it meets all the town planning approvals.”