In mid-October we reported on the second part of the Means Test – how Centrelink assesses income. In this update we explained how the income test works, what is ‘earned’ income and what is deemed. We then asked you to share any aspects of the income test that might still concern you. As with the assets test covered in a previous article, our members have many questions! So today we drill down into some of the lesser-known Centrelink rules on income, including work allowances, overseas pensions and renter cut-off points. We hope that you will continue to share any queries you have as this enables our team to provide the most relevant information for those in retirement – or planning to be.
Your income test questions answered
Is Steve’s car allowance included?
My income includes a car allowance of 98 cents per kilometre; 88 cents of that is non-taxable. I travel to a number of stores within my region, so this can total up to $5000-6000 over the 12-months. Is this taken into account for the income test? I am casual and am looking at reducing hours worked but need to find the correct balance. I am 67 years old in two weeks so I am age eligible.
Steven clarifies:
Centrelink assesses your gross income not taxable income, so yes this allowance will be included in your assessment.
What is the bank account limit, asks Rob?
What is the limit that you can have in your bank account after you have downsized in retirement and start renting?
Steven says it’s not just about your bank account:
Hi Rob, the asset limit is on your total asset value, meaning superannuation, cars/bikes/boats/trailers, shares, and also money in the bank. Not just money in the bank on its own. You can CLICK HERE to see the current asset thresholds.
Robyn wants to know about deeming:
I notice that income is deemed on the super fund balance and also on income from pension account earnings. If the income account is created from the super balance, how does this work?
Steven advises that this income is only counted once:
Hi Robyn, Centrelink only apply their deeming process to the balance of your superannuation pension account. They do not then apply it to the regular payments you receive as well, so thankfully there is no double dipping.
Greg has a Defined Benefit Account
How is a Defined Benefit Account assessed by Centrelink?
Steven replies:
Hi Greg, Defined Benefits are assessed as income. This is based on the gross amount you receive minus up to 10% depending on your tax-free component.
Paul is seeking clarification on ‘couples’ treatment
For a ‘couple’, if one has reached retirement age but the other hasn’t, is the income of the non-retirement age person taken into account in assessing the income of the retirement age person?
Steven says yes:
Hi Paul, you are 100% correct, the younger partner’s income (and assets) still form part of the older partner’s assessment with the exception of a younger partner’s super if still in accumulation mode.
Matt has a similar question:
My wife, who is 58, is still working while I’m 69 and fully retired. None of the examples mention this situation when discussing asset and income limits unless that means I apply as a single pensioner which I don’t believe is the case.
Steven confirms that couples are treated as couples:
Hi Matt, even if your partner is under Age Pension age you are still assessed as a couple and as such the couples’ thresholds are the ones applicable.
Philippa is a sole trader
If I am working as a sole trader with a private practice, earning varying amounts each fortnight, do I have to declare fortnightly earnings?
Or do I wait until tax time for everything to be adjusted – and potentially receive a bill from Centrelink for being overpaid.
Steven shares the best way to report:
Hi Phillipa, when you are self-employed you are not forced to declare fortnightly earnings like a standard employee would be. As you pointed out, though, waiting until tax time could result in over or under payments. If your pay fluctuates then you may wish to provide Centrelink with a Profit & Loss statement periodically throughout the year so they can more regularly update your payments (based upon the latest figures) rather than waiting a whole year.
Bozena asks how overseas pensions are assessed
How is a foreign pension assessed in the income test please? Is it just simply added to the income?
Steven replies:
Hi Bozena, yes foreign pensions are assessed as income on top of any other income received.
Gary is a seasonal worker
Hi, I am just about to start a single Age Pension and wondering whether the income amount I will be allowed would be based on a fortnightly income or an annual income. I am a seasonal worker and only work as a casual worker for six months of the year. The fortnightly income when working varies depending upon hours worked and at times can be $1100 . Will I lose the pension payment for these fortnights or is it averaged out per annum? My annual income is approximately $15,000.
Steven suggests how this can be reported:
Hi Gary, when doing seasonal work the best thing to do is let Centrelink know when it starts so they can turn fortnightly reporting on, then declare each fortnight’s earnings, and then once finished let Centrelink know so they can turn it off. For the fortnights where you exceed the threshold your pension would be reduced or potentially $0 but then the next fortnight when your income reduces, the Age Pension payment would increase again.
Jacqueline enquires about an accumulation account:
Hi, my husband has all his superannuation in retirement phase as an income stream. He has held off applying for an Australian Age Pension as I have, until recently, still been employed. Now that I’ve retired, he applied for the Age Pension. We fully disclosed all assets in his application, including my superannuation which I have not converted to an income stream product and is therefore in accumulation phase.
The ATO (Centrelink?) has not included my accumulation phase superannuation in the assets or income assessment. Is this correct? If I make ad hoc retirement withdrawals from my accumulation phase superannuation will this affect my husband’s Age Pension assessment?
Steven explains why this is exempt:
Hi Jacqueline, if you are under Age Pension age (67) then your accumulation account will be exempt from assessment, even if you take commutations out of it. Once you either turn 67 or convert it to a pension like your husband’s, then it will become assessable. So if you are already 67 then it is already assessable and you should declare changes in the balance to Centrelink when you take funds out.
Have we covered most of your major concerns?
Or do you have other income test questions you’d like answered?
Making the most of the rules
Many of the above questions are seeking a clearer understanding of the way the rules work. The tailored Maximising your entitlements consultation, in which you can ensure you are using all the rules to your own best advantage, offers the chance to explore your entitlement options.
Hi, I am about to open pension account in my Super. Is the additional income received fortnightly from this account effect my age pension?
Hi Elizabeth, thankfully no Centrelink do not assess the payments from your account-based pension as income. You should still tell Centrelink about the swap from accumulation to pension and provide an income stream schedule for the new account (your super fund should provide this automatically, if not ask them for one).
Hi Steve, Can you clarify this for me. Won’t Elizabeth’s income stream payments, on top of her pension, have the ATO’s formula’s earnings deemed as income, hence impacting her rate of pension if it makes her combined income of ‘deemed’ asset, the pension amount itself each fortnight and any work earnings go over the limit that she’s allowed.
:
Hi Candy, I apologise in advance if I have misunderstood your comment however having reviewed the original comment and my response I am confident I am correct. I’m not a tax specialist so I am not certain how ABPs and the payments from them are treated by the ATO when lodging a tax return however from Centrelink’s position whether your super is in pension or accumulation makes no difference, both are assessed the same. I believe you were querying that if nothing else the deemed income would be higher because of the payments having deeming rules applied when they hit the bank account but conversely, if the account was left in accumulation mode with no payments then the money would be sitting in the super fund and have the same deeming calculations applied. Therefore either way the money has deeming applied and using the same formula either way.
Hi, I have just applied for the Aged Pension ( I’m 74). My partner ( 64 ) is not working, I am. Centerlink have just deposited money into my account which I believe is too much. I called them and went through it with them and they say it is all correct.
I don’t believe them and so have put the money aside. How can I get a correct (re)assessment ? My gross Income between 1st Oct 2024 and 30th June 2025 will be $69,950 yet they are paying me $788, plus supplements, a fortnight.
Hi Warwick, kudos to you for being proactive and not just taking the extra money. generally the best thing to do is to call them but you said you tried that already. Perhaps try calling their complaints line (1800 132 468), that is generally manned by senior staff so better chance of getting someone who appreciates the situation and has a closer look.
Hi, if I draw down on my super in accumulated stage is it declared as income for Centrelink purposes? Is it declared as an asset in my bank account until I used it. My husband is on Aged Pension and I am on job seeker 65.
Hi Rob, no payments from superannuation, whether in pension mode or accumulation, are assessed as income. Centrelink assess both types of super the same way. You should declare to Centrelink the transfer though even if you are not spending it right away so that they have to most accurate balances for future reference.
Einstein would have a problem to calculate Australian age pension entitlement.
Could you be more precise and clarified this sentence : “ minus up to 10% depending on your tax-free component.“
Hi Stefan, it is difficult to specify in this forum because it varies from one defined benefit to the next. If you’d like to know how it would apply to you specifically you’d need to book a consultation with one of our specialists HERE.
I occasionally do casual work and get reimbursed for travel expenses are the travel expenses classed as income
Hi Martin, no reimbursements are not assessed as income.
hi Steven, I work 1 day a week and salery sacrifice that entire day so I pay no tax on that day and can use the entire tax free threshold to offset my interest income. will I be disadvantaged in any way when I apply for a part pension, as I know they gross up fringe benifits by some multiplier on your income statement.
Hi Stewart, you wont be penalised but Centrelink will assess the gross total as income regardless of the salary sacrifice so the amount paid by your employer will still be assessed as income.
People need to stay on top of all of the information via the Centrelink site. Otherwise they will not be ware if they are being underpaid, overpaid or something else. For example, as soon as I hit the retirement age and the assets test was applied, someone jumped the gun and applied it retrospectively and I was cheated of more than $300. I phoned Centrelink on 2 different numbers and spoke to 2 different people. It was clear they were withholding something and not really helping with the issue. So I reported this to my federal MP and he put a rocket up them to fix it.
Also included in the Assets Test are items such as jewellery, works of art, gold bullion, coin collections, furniture, appliances, TVs, computers, craft materials, garage tools, gardening equipment, every item in your home that is not a permanent fixture. Even your curtains are assessable, but not clothing, shoes, toiletries, cleaning products. So if you plan to buy a caravan to tour Australia, the caravan will be considered an asset, along with the vehicle you bought to tow it. Will you be able to afford to go anywhere?
Just reading the Lorikeet mention on assets…
Just remember when you do the assessment it is on the value at garage sale prices and NOT what you bought them for ,..
Read an article the other day and what is considered the average content price at a garage sales of the family home … go check as a BIG difference .
When one of the two partner apply pensions to Centrelink, ( while partner still working ). does Centrelink assessing income/asset combine from both ? or only of the one applying for pension ? likewise for healthcare card ?
Hi Hanh, Centrelink assess both incomes/assets, not just those of the person applying.