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Importance Of Income Tested Strategies & Annuities

Last modified: 17 Dec 2012

The Department of Veteran Affairs often known as the DVA is in charge of paying a social security age pension to eligible Australians. This government body assesses the eligibility of applicants by using the assets and income tests. This being said, another test is also used to determine the eligibility criteria of the applicant and this test that will determine if the applicant will get his benefits or not.

To make sure that you are eligible to get the highest amount of benefits for the social security entitlement perk, you should have the least amount of investments or assets and income under all the types of tests mentioned above. Listed below are some important things you must know about income tested strategies and annuities.

Basics of Income Tested Strategies

Any income that you receive irrespective if it is through gifts, other entitlements or earnings is considered as part of your income and is counted towards the income tests. Investments are also counted towards this test. Thus it can be said that if you receive any profits or salary from your job or if you receive rent from real estate property then all this will count towards your income hence will be used in determining the total amount of social security benefits you can get. In addition, income streams from annuities, superannuation funds and pension amounts are also counted towards this test.

Important Information about Income Tested Strategies for Annuities

Putting money in certain types of annuities is one of the best ways to make sure that you get a steady flow of income as long as the annuities are active. Although by investing in annuities you cannot readily make use of the capital value of the annuities; by investing you can benefit from the guaranteed income you get from the income stream.

The amount of income you get from the annuities will depend largely on two factors that are the length of the investment and the residual capital value of the investment at the end of the term.

Buyers can invest in either short term annuities that have a term of less than 5 years or long term annuities that have a term of 6 years or more. Short term investments are taken into consideration by the Department of Veterans Affairs and these short term investments are tested in relation to the deemed income. It should be noted that the actual amount of income you receive from short term annuities is not taken in calculation during the income tests; only the deemed rate of income set by the DVA is taken into consideration. Short term annuities do not give the investor the benefit of a deductible amount.

Long term annuities are considered better for various reasons. For instance, long term investments are subject to a different kind of income test and long term investments allow you to get a lower assessable income since a deduction is offered to investors on such investments. The total amount of deductible offered


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