Income test made easy: How Centrelink assesses your earnings
How much can you earn and still qualify for an Age Pension?
Most pre-retirees and retirees would quite reasonably expect this question to be answerable in one sentence, or maybe two, to allow for single and couple circumstances.
But no, there’s way more to it than that. Income is viewed in three different ways for Age Pension entitlement and with recent changes to the Work Bonus, such assessments can be difficult to understand in your own particular circumstances.
Today we simplify the income assessment process with thanks to Steven Sadler, Head of the Retirement Essentials Customer Services Team. Steven is frontline for queries about eligibility and so knows how the rules work. And how to explain them in plain English. He suggested we break down our explanation into two vital, consecutive steps.
Income assessment, Part One – thresholds
For anyone to receive an Age Pension, they will need to pass two out of two Centrelink tests; an income test and an assets test. To pass and at least get some Age Pension, you need to come in under the current upper limits in the thresholds. These are:
Income thresholds upper limits
- Single 58,318 per annum
- Couple $89,211 per annum
More detail can be found here.
Asset thresholds upper limits
- Single Homeowner $622,250
- Single Non Homeowner $846,750,
- Couple Homeowner $935,000
- Couple Non Homeowner $1,159,500,
More detail can be found here.
Just to repeat the rule, you need to come in under both the income and the assets thresholds, or, as Steven puts it, ‘No ifs, buts or maybes’.
If you do pass both tests, you will qualify for at least some Age Pension, which leads us to the second part of income assessment.
Once qualified, how is income assessed?
The income you earn is next assessed in order to ascertain the amount of pension you will receive. There are two main components to this income assessment:
- Income from ‘exertion’ (work, employment, effort)
- Income which is ‘deemed’ to have been earned from certain assets
It is the work income (earned from ‘exertion’) to which the Work Bonus will be applied. You do not have to do this calculation. Once your Centrelink application is approved, a credit (or ‘bonus’) of $11,800 will be set against your earnings before your rate of Age Pension payments can be affected.
But conversely, in your application, you cannot use the $11,800 to ‘reduce’ your income in order to report lower than the threshold. It is only after you have achieved Age Pension status that such a credit comes into play.
Here’s a quick example:
Jennifer has found out she is entitled to a full Age Pension as she is under assets test thresholds and also the income threshold as she earns just $180 per fortnight babysitting. This is below the threshold of $4940 per annum for full Age Pension entitlement.
After receiving her Age Pension entitlement, she is offered extra work, which will pay $200 per fortnight, or $5200 extra a year. When added to her existing babysitting income, this will total $10,140.
Her assessment allows for $4940 earnings, and then a Work Bonus of $11,800 will be set against the remaining $4940, meaning she has retained her full Age Pension entitlement, and has $6860 remaining in a Work Bonus credit which can be used as needed over coming years.
In this example, Jennifer has no assets, so cannot be ‘deemed’ to earn such income. Those with assets which do need to be deemed will have to factor in these amounts, alongside their actual work or ‘exertion’ income.
It’s really important to understand the full implications of income earned from work, as it is easy to exceed thresholds if you are unsure of what they are or how different income is assessed.
One more thing:
The current Work Bonus which is $11,800 p/a will return to the base rate of $7800 p/a as of January 1, 2024.
If you would like further support with Age Pension entitlements, help is at hand in the form of tailored consultations.
Our Age Pension eligibility calculator takes the work bonus into account by first assessing your eligibility and then if you are eligible it will automatically apply the work bonus to assess the amount of your entitlement. You can check your entitlements below.
Thank you for the pension articled you included in your advice this morning. However I am still unsure whether the $300 a fortnight I withdraw from Super is included in the income test. I am a teacher and work one day a week at the age if 72. After many attempts I gained a small pension of $92 per fortnight which was so exciting!!!
I read the articles you publish all the time and find them very informative.
Keep up the great work
Shona Harper
Hi Shona, thank you for your question! The $300 you draw from super each fortnight is not counted as income. Centrelink will deem the account to earn income based on the deeming rate and the total balance in your super. CLICK HERE to learn more about deeming.
How s the Work Bonus applied.
Does it accumulate at $300 per fortnight continuously?
For example. Once the income you declare reaches $11.800 (or $7.800) does the Workbonus credit start again?
Is theWork Bonus limit per annum? What happens once you have used up your credits of $11.800?
Hi Norma, thank you for reaching out! We’ve actually covered the Work Bonus in greater detail HERE.
My question refers to a couple where one member is at eligible age for an age pension but the other member is say 5 years from reaching eligible age (ie 5 years younger) and still working a 40 hour week. How are the income and assets tests applied and will the younger working member have to reduce their income so their partner can receive a full/part age pension?
Hi Geoff, thank you for your comment! In the situation you have mentioned, the younger partner’s income AND assets are included in the assessment of how much Age Pension the older partner can receive. The only exclusion is if the younger partner’s superannuation is still in accumulation phase, then it will not be assessed. To best understand the impact a younger partner’s income/assets have on a claim, please use our free online calculator HERE.
I have an overseas pension ( I am 77 years) I am married but my wife is retired so no income from her. My income is approx $96,000 before tax. And does attract a Tax offset as earning from a super fund from overseas. We own our house valued at $630,000 and have $30,000 in savings.
So the real question is, does the income threshold figure count as gross or net income?
every time i have looked at the eligibility for us i seem to draw a blank. So I just end up paying the TAX man about $21,000 per year and no support at all.
Hi Keith, thank you for getting in on the conversation! Centrelink assess income based on the gross value, not net.
Hi
I am retired and receiving $910 a fortnight from my Super fund as a pension. Is a super pension different to withdrawing an amount each fortnight ( I refer to Shonas question above) in that it doesn’t count as income?
Also if I reduce the amount of super pension each fortnight would my centrelink pension increase?
Thanks
Hi Steve, thanks for your query! Your super will be assessed the same as Shona’s which is an asset based on the total value. Income will be deemed to be earnt based on the deeming rate and the balance.
Hi,
I am about to reach retirement age (27/3/23) but will continue to work part time. My fortnightly income will be $626 until October. Will the work bonus be applied to this therefore only leaving $326 as assessable income? My husband is retirement age and not working. Any income from superannuation etc will be minimal. Will we still be able to receive a pension?
Thank you
Hi Kerry, thank you for reaching out! The best way to confirm not just if you are eligible but how much pension you may receive, is by completing our free online calculator HERE.
Hi Steven
This question is regarding a part pension entitlement pursuant to the asset test (deemed income), where the underlying asset base value may fluctuate over a given tax year. Coud you please briefly indicate the mechanics. How often is a reassessment made, what / who triggers it, and what is the usual outcome (pension catchup, or overpayment to be repaid) ?
Many thanks
Hi Gunter, thanks for your comment! Centrelink re-assess variables such as share values or foreign exchange rates on a monthly basis. Centrelink will then adjust your pension payments up or down based on the new rates applied each month.
Hello Steve. I was referred to Retirement Essentials through a friend that has used them. I am currently using Retirement Essentials to correspond with Centrelink for me to be eligible for the aged pension… still waiting on Centrelink to approve… I am suppose to be eligible on 7 April 2023. I would like to thank your staff that I have been dealing with… they are excellent and very knowledgeable. I can highly recommend Retirement Essentials to all.
Hi Maxine, thank you for your feedback! I appreciate you taking time out of your day to compliment our staff. I shared your comment with our Customer Service Team who were delighted.
If you have a company acting as trustee for your discretionary trust and all earnings for the couple are in the trust, how is the individual assessed within the income limits as no actual income is received by the individual and no assets are owned by the individual/couple
Hi Martin, thank you for your question! The answer is that any income/assets in the name of a Private Company/Trust will be assessed as the individual’s based on their level of ownership of the company. So a 50% owner will have 50% of the company’s income/assets assessed as theirs unless it is specified otherwise in the company structure.
i am already at retiring sge 69 in september but still working part time thinking of applying for pension after financial year. Do i have to resign from work to fo this or just cut down my hours. when i retire i only have around $10k from super that i want when i
finish working but thinking of going
back to wiork 2 days a week later. will i get a gull pension? no asset except the house i live in.
Hi Ester, thank you for sharing your situation! The best way to confirm how much pension you may receive is by completing our free online calculator HERE. You can fill it in first based on your income and then again with no income to see what the difference to your pension is (if any).
I am 67 years old & I receive a UK state pension totalling approx $16,000 a year, I’m not sure what this counts as in the Income/Asset Test? I also take $1,000 a month allocated pension from my Super.
My husband is retired, but 3 years away from pension age here, he receives a military pension from UK totalling $25,000 a year.
We do not have any other investments.
We live in a land lease community so own our home but lease the land, I’m not sure how that works for Centrelink?
With these incomes I’m not sure if I qualify for a Centrelink Pension? Advice appreciated, thank you.
Hi Sue, thank you for responding to our article. In summary Centrelink assesses State Pensions from the UK under the income test, the military pension will also be included in the income test. Allocated Pensions and/or super are assets tested and count for deeming under the incomes test. It can be very confusing which is why we offer entitlements consultations for those who just want to talk through the Centrelink rules or our phone applications service if you want someone to assist you over the phone to complete the Centrelink application (including answering your questions).
ive been retired for a number of years my pension is asset tested should my balance on my super be updated each year and how
Hi Bruce, thanks for the question. Generally Centrelink is able to gather updated superannuation data automatically every 6 months in March and September (often you will see an adjustment to payment rates at this time if you are on a part pension if there have been significant changes in the previous 6 months). If you have concerns you can access the ‘income and asset details’ section of the Centrelink portal through MyGov and review what details they currently have on file to reassure yourself it is up to date. If you think anything is incorrect this is also the area through which you can update any details. Best of luck, Nicole.