Nick Bruining Q+A: Centrelink’s Low Income Health Care Card a safety net for families when things go wrong

Question My partner recently lost his job in the mining industry. After looking on the Centrelink website, I can see that my income means he would probably not qualify for any payments. While we can just make ends meet with my income for now, with two young children I am looking for any suggestions to reduce our expenses. A friend told me about a special single income discount card, but I can’t find any information. Can you help? Answer The card you are referring to is probably the Centrelink-issued Low Income Health Care Card. This is issued to low-income earners who are Australian residents and satisfy the income test conditions. From September 20, the couple’s income test limit will be $1339 a week, but each dependent child increases this limit by $34. In your case, total pre-tax income needs to be below $1407 a week. This amount is averaged over an eight-week period, so depending on when your partner’s income stopped you may qualify now or in the near future. The card allows you to access a range of State and Federal government discounts including PBS-listed medicines at $7.70 a prescription, bulk-billing for some doctors and discounts on utilities such as power, water and services such as public transport. Once the card has been granted, income can increase by 25 per cent before you become ineligible. In your case, that would mean your income could rise to $1758.75 before you would lose the card. You can apply for a LIHC online through the myGov portal after linking Centrelink service to your account. Question In a recent article, you mentioned that investors using an account-based pension should switch their recent profits to the cash option in anticipation of a possible market downturn. Over the past six months, my $329,000 super fund has returned a little over 6 per cent, lifting it to about $349,000 today. I would like to shift that profit of $20,000 to cash, but I can’t work out how to do it with my particular fund. I use a large, low-cost industry super fund and have the money invested in the growth option. Can you explain how it’s done? Answer Congratulations on the success of your fund, and I agree that now would be a good time to “harvest the profits”. No one knows what will happen next, but by taking the profits you will know that you have locked them in and can then draw down your payments from the cash option. Ideally, you will have enough in cash to cover the next one to two years of withdrawals. To do this, you will need to log into your super fund member’s website. Next, select the tab dealing with investments. Under that, you should see an option to change investments. There should be an option to “dial-your-own” mix. When you select this link, you will be presented with a range of investment options and an ability to allocate your total super fund balance between those options. In some cases, this could be a dollar amount and, in others, a percentage allocation. In your case, $20,000 of the current $349,000 is 5.7 per cent, so rounding it up to 6 per cent makes sense. On the screen, the new allocation would be “growth” 94 per cent and “cash” 6 per cent, totalling 100 per cent. A screen dealing with “payment options” will also allow you to indicate the order that investments are cashed-in to meet your regular payments. With your now modified mix, you would select one against “cash” and two against “growth”. That means the fund will use up the cash units first and then move to growth units to meet your payments. The trick will be to repeat this process once or twice a year to gather future profits and replenish the cash pool. If the market is down at the time, you simply wait for it to recover. Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association