Page 13 - Wealth-Adviser-Issue-137 (FWP)

ISSUE 137
MAY 2026
Ask a undocumented family advances are deductible debts or effectively
gifts to the couple. Without clear documentation, the advance
Q&A: Question may not be treated as a genuine debt of the couple, reducing the
amount effectively returned to you. If she were to enter bankruptcy,
a trustee requires evidence to accept your claim as a creditor. And
under Centrelink rules, an undocumented transfer can be treated as
a gift, triggering the gifting and deprivation provisions, rather than
Question 1 as an assessable loan asset.
My home is worth far more than my super, but I don’t want to A proper agreement should be in writing, signed by both parties
sell. I’ve heard about reverse mortgages — is there a government at the time of advance, and identify the amount, repayment terms
version, and how does it compare? (including whether interest applies), and what happens on default.
Yes, there is. The Home Equity Access Scheme (HEAS) is the For substantial amounts, registering a second mortgage can also be
federal government’s reverse mortgage product, administered by considered. Your adviser can work alongside a solicitor to ensure
Services Australia. It allows eligible Australians of Age Pension age the structure suits your broader financial and estate planning
to borrow against the equity in their home, typically as a fortnightly position.
income stream, with the loan repaid when the home is eventually
sold or from the estate. Question 3
The most striking difference between HEAS and commercial re- I’m over Age Pension age, still doing some consulting work, and
verse mortgages is the interest rate. HEAS currently charges 3.95% someone mentioned the SAPTO. How does it actually change how
per annum, compounding fortnightly — substantially lower than the much tax I pay?
8% to 9% range typical of commercial lenders in early 2026. Over a The Seniors and Pensioners Tax Offset (SAPTO) is a non-re-
decade, that gap can preserve tens of thousands of dollars of home fundable tax offset available to Australians of Age Pension age who
equity. HEAS payments are also exempt from the Centrelink income either receive a qualifying government payment or would qualify
test, which protects part pension entitlements. but for the means tests. It works alongside the tax-free threshold
Commercial products allow larger amounts to be borrowed and and the Low Income Tax Offset to lift the effective amount of
offer more flexible lump-sum and cash reserve structures, which income you can earn before any income tax is payable.
can suit homeowners needing significant capital — for example, to For 2024–25 — the most recent year with confirmed thresholds
fund an aged care entry. Both products carry a no-negative-equity — the maximum offset is $2,230 for an eligible single, or $1,602 for
guarantee, meaning you can never owe more than the home is each member of an eligible couple. Eligibility is assessed against
worth when sold. “rebate income”, which is broadly your taxable income plus certain
Choosing between them depends on whether you need ongoing other amounts such as reportable employer super contributions
income, a one-off lump sum, or both, and how the interest com- and deductible personal super contributions. Combined with the
pounding affects your longer-term position. A conversation with tax-free threshold and LITO, SAPTO can lift the effective no-tax
your adviser can help you weigh up the options. point for a single eligible senior to around $33,886, and to roughly
$31,888 each for an eligible couple.
Question 2 For most retirees aged 60 or over, ordinary super pension
We’re planning to lend our daughter some money toward her drawdowns from a taxed source are tax-free and don’t count toward
first home. Do we really need a formal loan agreement, or is a rebate income, which means employment income can often be
handshake enough? earned with very modest tax payable. Older public-sector “untaxed”
A written loan agreement is strongly recommended, even be- pensions are an exception. Reviewing whether SAPTO is being
tween family members. The reason is not that you expect things to correctly applied to your return — and how it stacks with your other
go wrong with your daughter, but that other parties may later need income — is worth a conversation with your adviser or tax agent.
to determine whether the money was a loan or a gift — and without
contemporaneous documentation, the default treatment may not be
what you intended. With all these topics, there is no single “right” choice. Your personal situation
Three situations make this matter. If your daughter were matters, and you should seek advice from a licensed financial adviser to understand
to separate from a partner, family law courts assess whether what is most appropriate for you.

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