income test rules

They say a picture is worth a thousand words. But in the world of retirement income, an example is often worth even more. That is no doubt why our many members enjoy our comments and Q&A articles – by reading about other people’s situations, they can apply the answers to their own. 

We recently reported on the income and assets tests – how they are applied and the new limits from 1 July this year. These articles encouraged a flood of questions. Some, due to the level of detail and privacy required, need to be handled offline. But many were able to be answered swiftly. When it comes to quick answers on any entitlements, Steven Sadler (Head of Customer Services) is our man. So read on to learn more about the income rules and how they might affect you.

Chris is on a Disability Support Pension (DSP) and asks:

I’ve been on the DSP for 22 years. I’m now 68 so should I stay on the DSP or apply for the Age Pension. I was told the Age Pension has the same cut-off points (thresholds).

Steven says:

Hi Chris. Technically the DSP does offer a couple of extra benefits the Age Pension doesn’t. The main advantage of the Age Pension is that it is a bit quicker and easier to apply for and maintain. Having said that, if you have been on the DSP for 22 years, I’m guessing you know how it all works by now and so it’s probably better to stick with it, presuming you are still eligible.

David has an investment property and asks:

I’m 69 and not working. I used my entire super savings to pay off my mortgage, and I now live off the rent from my investment property, which is about $22,000 a year. But I was told by Centrelink that as my investment property is worth about $475,000, I won’t qualify for even a part-Age Pension. Is this right?

Steven says:

Hi David. Presuming you are single (as you have not mentioned a partner) then the maximum assets you can have as a homeowner is $686,250, so the investment property alone would not rule you out. If you have other financial assets, add them to the value of the investment property to see if you come in under this threshold. The free Retirement Essentials Age Pension Entitlement Calculator was designed to help in this regard.

Linda needs to know about accumulation rules:

I am 64 and retired but my super ($170,000) is still in accumulation mode.
My husband receives an Age Pension.
I will soon receive an inheritance of $360,000. I intend to place this amount into my accumulation super account for the next two years to avoid it being assessed for my husband’s  Age Pension under the income and assets test. If I decide to withdraw, say, $40,000, for a new car does my super account remain in accumulation mode?

Steven says:

It’s always best to double check with your super fund Linda, but once you are over age 60 and have met a condition of release e.g. you have retired then , yes you can make a withdrawal and leave the remaining balance in accumulation.

Paul wants to know about share income:

If I hold $250,000 in investments, will Centrelink only assess the deeming rate on this sum? Or if I choose to engage in share trading will they also be interested in income made (net of Capital Gains Tax)? Will this additional income have an effect on my thresholds?

Steven says:

Hi Paul. The only income that Centrelink assesses any financial asset to be earning is the deemed income using the official deeming rates. Dividends, interest, and returns on super etc. are not assessed as income; the financial asset is assessed using deeming instead.

Kenneth thinks he might now qualify:

Here’s the detail he shared to check:

I have $300,000 in the bank
I have $326,000 in super
My car is valued at $29,000
I have a lodger paying $200 a week
I have $5000 in another bank account

Am I able to get a part-Age Pension? And can Retirement Essentials process the application form as they did my Commonwealth Seniors Health Card (CSHC) for me?

Steven replies:

Hi Kenneth, based on those figures you would be just under the asset threshold for a single homeowner and would be eligible for a small pension. And yes, we’d be happy to assist with processing the claim forms for you. You can get started by logging back into your account.  

Bozena asks about early pension entitlement:

Hi, is it possible to access an Age Pension before reaching your pensionable age? A friend of mine says yes, but at a reduced rate. I do not believe that is correct.

Steven agrees:

Hi Bozena. I think perhaps your friend was referring to an Account Based Pension (ABP) through their super fund? You are correct though; the Australian Government Age Pension is only paid once you turn Age Pension age which is 67.

JG asks about work income:

I will be 67 next year and am currently working part-time (30 hours per week) and earning a net salary of $1800 per fortnight. Will I qualify for the Age Pension?

Steven clarifies:

Hi JG. Centrelink assesses your gross income, not net, and the current threshold (presuming you are single) is $2,444 per fortnight. There is a good chance that this threshold will increase between now and when you turn of age.

A final comment from Ken:

And last, but certainly not least, here’s an interesting point of view. Many members note that their pension entitlements are far from a burden or a cost to current taxpayers as they have paid taxes across their lives. But Ken believes that it is fair to note that Federal Budget spending is for the current year, or the forward estimates (the next four years). 

Says Ken:

Just because you have paid taxes all of your life ought not and does not have any relevance to your entitlement to the Age Pension. Paying taxes is to fund government expenditure for that particular year.

We trust that these diverse questions and their answers have helped you to better understand Age Pension rules. But should you require further help, the following two consultations are sure to assist:

An Age Pension consultation where you can ask any questions about your own particular situation

OR

A Maximising your entitlements consultation which helps you discover if you can make any changes to maximise your Centrelink entitlements.

What’s your point of view?

Sometimes it’s fair to ask if the rules associated with the Age Pension aspect of retirement income have just got too complicated … what do you think?