How love can affect your income
Frank Sinatra sang that ‘Love and Marriage’ went together like a ‘horse and carriage’ back in 1955. But that was a lifetime ago, and relationships and money are now viewed entirely differently. Marriage is far less frequent, with many people happily partnering instead. And there were virtually no divorces back in 1950s, compared to the dramatic upsurge in the 1970s when no-fault divorce was introduced.
Society is now generally very tolerant of almost any type of living arrangement.
But when it comes to money, your relationship status can still matter a lot.
You might wonder why. Whose business is it anyway? And that’s a fair question. In retirement, the answer depends upon your source of income. There’s about a 70/30 split when it comes to retirees receiving government benefits or those who are self-funded. So that’s the first classification that indicates how much your relationship could affect your income.
Let’s start with those who are self-funded, i.e. they do not qualify for an Age Pension at this stage. As they are not applying for government income support, their relationship status is not relevant. But most self-funded retirees are now eligible for a Commonwealth Seniors Health Card (CSHC) since the increase in income thresholds in November 2022. These cards provide valuable health, transport and energy discounts so are well worth the application. And since the November change in thresholds, Centrelink has made it even easier for self-funded couples to apply just once, in a couples’ application. So for this purpose, your relationship status will be relevant.
There is also the very real matter of estate planning. Regardless of whether you are likely to receive an Age Pension or will be self-funded until the day you die, the way you organise your affairs is extremely important for the welfare of those around you. Many people will opt to fill in a low-cost will purchased at the local newsagent. And that may be fine for those who have little in the way of assets. But if your assets include property, superannuation, shares, managed funds, annuities and more, it is important to seek professional legal advice about the way you would like your estate divided. Not doing so could severely damage the financial interests of your partner, your children, your siblings and others you care about.
What about Centrelink?
If you hope to receive an Age Pension, Centrelink’s assessment of your relationship status can influence three important aspects of your benefits; if you get a payment, the type of payment and the amount.
This is because the thresholds for the means test (both income and assets) are different for singles and couples.
So your payment will depend upon whether you are viewed as a couple or single. And this is where it can get tricky.
Generally, you will be defined as a couple if you are married, in a registered relationship or in a de facto relationship.
If you separate, you need to have to separated both physically and emotionally. Our Customer Services Team leader, Steven, mentioned the other day that he had worked with a lady who was hoping to receive a single Age Pension. But she was still living with her ex-husband, joining him for social events – and they hadn’t yet told the family that they were no longer a couple. To all intents and purposes, including Centrelink, they are still a couple. So the decision to proceed with a single or couples pension application needed a rethink.
And then there are other family relationships. If you live with a sibling, parent or adult child, that’s fine according to the rules of the Age Pension. It is romantic relationships which are deemed to make you a couple.
There are various ways and means of communicating changed living arrangements to Centrelink, including a ‘separated under one roof’ declaration (required from each person). Such ‘ex-couples’ will also need to have their situation regularly reviewed by Centrelink to ensure the correct amount is being paid. Singles in share housing may also need to submit a ‘relationship details form’.
Further changes in relationship must also be reported. Failure to do so can attract fines and the need to pay back any over payments because of inaccurate original reporting. This includes people who partner – they are no longer two singles, but now a couple according to the Centrelink.
The main rule
The most important consideration, for those on entitlements, is to keep Centrelink fully informed of your relationship status. And if you are in any doubt, to check. Don’t just accept income without verifying that you are being paid the amount appropriate for your situation.
How do you find these rules?
Do you believe it should matter so much whether those on an Age Pension are single or couples?
Or should we simply strike one rate for all individuals and pay pension entitlements accordingly?