In question 3, why the function of asset test and income test like that? What are they based on ?

Margaret and Peter Martin, both aged 65, have recently retired. In considering their retirement plans, the Martins have decided to do an audit on their current financial situation. On 1 July 2015, they both purchased lifetime annuities for $60,000 each. These provide a $6,000 pension each per annum. In addition, they held the following assets as at 1 July 2017: Home Mortgage on home Prepaid funeral Term deposit at 5% Managed fund Direct shares Rental property Motor vehicles Antiques Jewellery $750,000 $100,000 $50,000 $330,000 $80,000 $60,000 $350,000 $40,000 $50,000 $45,000 On 1 August 2017, the Martins decided to give $100,000 (ie $50,000 to each of their two children) to help them with the purchase of their first homes. Peter has decided to take a part-time job with his local art dealer and expects to earn $100 per week. The Martins have come to see you for advice on 3 August 2017. 1. Calculate the Martins' assessable assets. 2. Calculate the Martins' financial assets. 3. Calculate whether Margaret and/or Peter are eligible for the Age Pension. 4. Are there any other strategies that you can suggest to assist the Martins to maximise their pension entitlement? Answer Assessable Assets Annuity Term deposit Managed fund Shares Rental property Motor vehicles Antiques Jewellery Total Minus gift 120,000 330,000 80,000 60,000 350,000 40,000 50,000 45,000 1,075,000 -10,000 $1.065.000 Term deposit Managed fund Shares Total 330,000 80,000 60.000 470.000 Assets Test = $673.90 -3.00 / 1,000 X (1,065,000 - 380,500) = $673.90 - $ 2,053.50 = 0 benefit payable Income Test Deeming: 1.75% x 83,400 + 3.25% (470,000 -83,400) = 1,459.50 + 12564.50 = $14,024 $14,024+ 6,000 + 5,200 = $25224 annually or $970 per fortnight $673.90 -0.25 x (970300) $673.90 - 167.5 = $506.4 However, the Assets Test applies; hence, no social security entitlement. Margaret and Peter Martin, both aged 65, have recently retired. In considering their retirement plans, the Martins have decided to do an audit on their current financial situation. On 1 July 2015, they both purchased lifetime annuities for $60,000 each. These provide a $6,000 pension each per annum. In addition, they held the following assets as at 1 July 2017: Home Mortgage on home Prepaid funeral Term deposit at 5% Managed fund Direct shares Rental property Motor vehicles Antiques Jewellery $750,000 $100,000 $50,000 $330,000 $80,000 $60,000 $350,000 $40,000 $50,000 $45,000 On 1 August 2017, the Martins decided to give $100,000 (ie $50,000 to each of their two children) to help them with the purchase of their first homes. Peter has decided to take a part-time job with his local art dealer and expects to earn $100 per week. The Martins have come to see you for advice on 3 August 2017. 1. Calculate the Martins' assessable assets. 2. Calculate the Martins' financial assets. 3. Calculate whether Margaret and/or Peter are eligible for the Age Pension. 4. Are there any other strategies that you can suggest to assist the Martins to maximise their pension entitlement? Answer Assessable Assets Annuity Term deposit Managed fund Shares Rental property Motor vehicles Antiques Jewellery Total Minus gift 120,000 330,000 80,000 60,000 350,000 40,000 50,000 45,000 1,075,000 -10,000 $1.065.000 Term deposit Managed fund Shares Total 330,000 80,000 60.000 470.000 Assets Test = $673.90 -3.00 / 1,000 X (1,065,000 - 380,500) = $673.90 - $ 2,053.50 = 0 benefit payable Income Test Deeming: 1.75% x 83,400 + 3.25% (470,000 -83,400) = 1,459.50 + 12564.50 = $14,024 $14,024+ 6,000 + 5,200 = $25224 annually or $970 per fortnight $673.90 -0.25 x (970300) $673.90 - 167.5 = $506.4 However, the Assets Test applies; hence, no social security entitlement