Impact on government benefits

There are several government-provided benefits that can be reduced if you have other "income". The main benefits that could apply to a retiree include:

• The "young spouse" New Zealand Superannuation that can be payable when you have reached age 65 but your partner has not
• Rest home subsidies
• Your Community Services Card
• "Accommodation Supplement"

Let's take the 'young spouse' benefit as an example. If you are now aged 65 and your partner is, say, five years younger, the partner is also nominally entitled to the other half of the married rate but receipt is subject to a "family" income test. The partner's half reduces by 70c for every $1 over $80 a week ($4,160 a year) of "family" income. So, if the family's other "income" exceeds $19,896 a year, there is no benefit payable in respect of your partner.

The question is what counts as "income" for this purpose? It's not the same definition as applies in the calculation of income tax. Work & Income can include payments that, for income tax purposes, would be treated as capital. Work & Income has a considerable discretion to include items as "income" - again, this differs from the approach taken to income tax matters which are very prescriptive.

Here is a link to a page on Work & Income's web site that talks about "capital" payments.

If there are periodic payments (probably more frequently than once a year) there is also the test as to whether you receive amounts for an "income-related purpose".

Regular payments, like regular draw-downs on a line of credit or a reverse annuity product, could therefore count as "income" for these kinds of benefits even though they are really capital.

Regular receipts don't affect New Zealand Superannuation where both recipients are over 65.

So, if you are receiving one of these income-tested benefits, an occasional or irregular draw-down to meet, for example, house repairs probably won't reduce the government benefit.

If you become entitled to such a benefit after you have taken out equity release, your equity release scheme should allow you the flexibility to stop further payments, if that is in your overall best interests.