Avoid these costly errors

A majority of retirees are on some form of government benefit at retirement age – just over 70% in fact.

By the time retirees hit their 80s, 80% will be eligible for an Age Pension.

So knowing how Centrelink works is critical.

And knowing how to avoid costly mistakes is of equal importance.

Today we share an overview of Centrelink – what it is, how it works, what you must declare and those things it’s not necessary to share. We also look at the different components of Age Pension payments and how they create a fortnightly income stream.

Read on to see what you really need to know to make sure your entitlements are the best they might be, for the duration of your retirement.

What is Centrelink?

Centrelink has become a shorthand name for delivery of Federal Government income support. It is actually a sub department of  Services Australia, an executive agency which was previously known as the Department of Human Services. Services Australia has the mission to  ‘support Australians by efficiently delivering high-quality, accessible services and payments on behalf of the government’.

Centrelink is responsible for delivery of services and payments. It is a national agency, employing thousands of staff across 320 offices and helping support a huge digital presence.

Here’s some quick facts from last year’s performance report which reveals that Centrelink:

  • Made $158 billion in payments
  • Service 9.7 million people in service centres
  • Handled 42.1 million phone calls.

What does Centrelink do?

As the interface between individuals and Services Australia, Centrelink is responsible for the management of support and payments. For pre-retirees this may include family, health or JobSeeker support. For those of Age Pension age (currently 66.5) it includes all Age Pension applications, approvals and payments, management of concession cards, and provision of financial information through Financial Information Support Officers (FISOs). Centrelink is also the agency through which Commonwealth Seniors Health Cards (CHSCs) are issued.

What Centrelink does not do

As the delivery agency for income and emergency welfare payments, Centrelink is the primary organisation for any Age Pension and related matters. That said, it only deals in federal government matters and so all state government support is handled separately by the individual states. Additionally, Seniors Card programs are run by the states for residents from those states. In short, Centrelink is not a general seniors’ delivery service.

When will I need to contact Centrelink?

You only need to contact Centrelink if you require some form of government assistance or have a question about Services Australia matters. Clearly there can be long wait times handling the 40+ million annual calls, but the Centrelink website offers a wealth of detailed information.

Do I need a Centrelink account as well as a MyGov account?

The short answer is yes. The long answer is much more complicated. A Customer Reference Number (CRN) will be required in order to apply for an Age Pension or Commonwealth Seniors Health Card (CHSC). But if you don’t already have a CRN, you will need to start with your myGov account and search for a CRN, or create one, before linking this back to Centrelink. If this sounds complicated, it can be so we have found our clients make the most headway by attending a Centrelink office in person to get there CRN and their identity confirmed at the same time.

Should everyone apply for an Age Pension?

There is not a lot to gain by applying for an Age Pension if you are sure that either your assessable assets or income are well over the thresholds. That said, a lot of people get the rules wrong, or overvalue their assets, so seeking advice if you are unsure is the best way forward. Using the Retirement Essentials Age Pension Eligibility Calculator is a quick and easy way to see if an application is in order. It’s also important to remember that you can apply up to 13 weeks before you reach the eligible age. You are only back paid to the date of application, not your first day of eligibility. And this means completed application including all required documents.

Is applying really as difficult as people say?

The short answer is yes. A printed application runs to 26 pages, with an extra 18 for income and assets information. There may be even further forms related to investment properties and company investments. Feeling tired? As noted above, there is a lot to read and understand and you may require support to fully understand the information you need to supply. It really all comes down to your own confidence level in dealing with extensive applications which include financial records.

How do I get started on an Age Pension calculation?

We strongly advise you to check your eligibility using the Retirement Essentials Age Pension Eligibility Calculator. It is free and quick and it allows you to see if it is actually worth applying. You can also use the calculator to see your updated Age Pension prospects if your financial situation has changed since you first qualified.

If you believe that an application is in order, you can go ahead and apply directly with Centrelink.

Or engage Retirement Essentials to lodge your claim on your behalf, including follow-ups to ensure your claim is reviewed in a timely manner.

If you are still unsure of the efficacy of an application, you may wish to speak with one of our experienced retirement income advisers.

The main point to bear in mind is that you should have a good idea of the likely outcome before you take the time and energy to start the application process.

And it is important to remember that there are real drawbacks to supplying incorrect information, even if this was done so unintentionally.

How is the fortnightly Age Pension payment made up?

Using the full single Age Pension as an example, here is how a full fortnightly payment (as of March 20, 2022)  is formed:

Base Rate $900.80
Supplement $ 72.40
Energy supplement $ 14.10
TOTAL $987.60
Plus possible rental supplements

A Pension Concession Card (PCC) is automatically issued for all who qualify for an Age Pension. This does not add to your weekly payment but can be used to reduce bills for energy, medical treatments, pharmaceuticals and transport.

What do I need to tell Centrelink?

Questions on a Centrelink application are heavily focused on three key aspects of your life:

  • Your identity (age, residential status, work status, address etc)
  • Your income (from a comprehensive list of sources, not just employment)
  • Your assets (again there is a long list of possible assets, with the exclusion of your primary residence)

The point of these questions is to then assess your situation against the means test – the threshold for both income and assets. If you fail on either test, you will not qualify for a pension. If you qualify, your payment will be dictated by the allowance from whichever test produces the lower amount.

The onus is on you to supply Centrelink with everything they request `, and be very specific on matters such as loans, gifting and potential foreign pensions.

How often do I need to update my declarations?

it is best practice to update Centrelink on the values of all your assets as regularly as you can. Obviously if you have a significant change in one transaction then you are expected to notify Centrelink within 14 days but if your overall situation is not dramatically different, then giving Centrelink updated values on all of your assets once a year is a good habit. Centrelink does not have access to check your bank account balances and will not depreciate your car.

Which aspects of my financial information can Centrelink access without my express permission?

Centrelink receives financial updates from the Australian Tax Office (ATO), superannuation funds and the Department of Immigration. It is important that your statements to Centrelink match the reality of your most recent financial statements. For instance, if your shareholding has risen significantly in value, it is up to you to contact Centrelink and advise this.

Advising Centrelink of changes in assets includes those assets which are now lower. Here’s a quick story of how one of our advisers was able to assist Max to increase his income.

How Max got a higher pension

Max did not realise it was up to him to keep Centrelink informed about his assets. He assumed they had access to all information about what he owns and how much it is worth.

So when his old Holden was hit by another car, and subsequently written off by his insurance agency, his car, previously valued by him at $15,000 was now replaced by a cheque for $2500. Sometime later when he contacted us to ask if he needed to advise Centrelink, we confirmed that he did and assisted with his update. His part pension increased from $14 per fortnight to $53 per fortnight – a handy $1001 per year in his pocket.

In summary, it is important you understand the way Centrelink operates if there is a chance you will be one of the 80% who receive Government support at some stage in your life. In a recent survey we asked retirees what they would advise others to do when it comes to making an application for a Centrelink service. Many had ‘gone it alone’ in making their applications, and their feedback was clear. Seeking professional support, such as Retirement Essentials, was a great way to reduce the work and worry involved.


Check Your Entitlements