THE amount of benefits a person receives from Centrelink is affected by either the income test or the assets test. Whichever test results in the largest reduction in pension benefits will be applied. Pensioners who take an interest in the earnings their investments produce can end up better off even if they are affected by either of the tests.
Q My wife is 62 and receives a disability pension of $191 a fortnight. I intend to start working part-time and will earn $860 a fortnight. We have assets of about $60,000, including a term deposit of $30,000. Can you advise how much disability pension she will receive when I start the part-time employment?
A Under Centrelink rules, the amount of income a couple earns affects the pension each can receive. As a result the amount of income you earn from your part-time job, plus the deemed income on your $30,000 term deposit, will affect your wife's pension.
Under the income test a couple can earn up to $256 a fortnight without their pension being affected. The $30,000 in the term deposit will have the deeming rates applied to it. Under the deeming rules, where one member of a couple is receiving a pension, a deeming rate of 3 per cent is applied to the first $72,000 of their joint financial assets.
In your case this will result in $35 a fortnight and the $860 being counted. For the income test, your wife will be regarded as earning $466 a fortnight. Normally this would result in a her pension decreasing by $169 a fortnight but, as she does not appear to be receiving the full pension now, it may not have this effect.
Q My grandmother is 75 and has been on a Centrelink pension since she came to Australia seven years ago. She has since saved up $25,000 from her pension and wants to open up a savings account so she can get interest. Will this affect the amount of Centrelink pension that she receives?
A Under the pension income test, Centrelink deems an amount of income that has been earned on financial investments. Cash, whether it is in a cheque account, term deposit, or even a jam jar, has the deeming rules applied to it. For a single person they would need to have more than $96,355 in financial assets before the deeming rules would affect the rate of pension they receive.
In your grandmother's case, she is well below this amount and will not be affected by either the income or the assets test.
Q My mother recently died, leaving my father her assets. He is 90 and receives a part-pension. How much in assets can he have and how much earnings can he receive before his part-pension is affected?
A A single, home-owning pensioner can have assets worth up to $181,750 without the pension being affected. Once a person exceeds this limit, their fortnightly pension is reduced by $1.50 for every $1000 of excess assets, with the pension ceasing when assets exceed $659,250.
A single, non-home-owning pensioner can have assets up to $313,250 with no effect on the pension, with the pension cutting out once their assets exceed $790,750.
A single pensioner can earn up to $146 a fortnight without their pension being affected. Above this limit, the pension is reduced by 50? in each dollar. The age pension cuts out altogether once a single pensioner's income reaches $1578.20 a fortnight.
Questions can be emailed to super@taxbiz.com.au
Self-Managed Superannuation Funds: A survival Guide by Max Newnham, is available in bookshops.
Frequently Asked Questions about this Article…
How does Centrelink decide whether the income test or the assets test applies to my age pension?
Centrelink applies both the income test and the assets test and uses whichever test reduces your pension the most. That means your pension payment will be based on the single test (income or assets) that results in the largest reduction in benefits.
What are deeming rules and how do they affect Centrelink pension payments?
Deeming rules are how Centrelink treats income from financial investments — cash, savings accounts, term deposits or even money kept at home. Centrelink 'deems' a notional income from these assets rather than using the actual interest you earn. For a single person, financial assets must exceed $96,355 before deeming affects the pension. For a couple where one member receives a pension, a deeming rate of 3% is applied to the first $72,000 of joint financial assets (for example, a $30,000 term deposit produces about $35 a fortnight under deeming).
If my partner starts part‑time work, how will their earnings and our term deposit affect my disability or age pension?
Centrelink counts a couple’s income and deemed income on financial assets when assessing each person’s pension. In the article’s example, the $30,000 term deposit produced about $35 a fortnight under deeming and the partner’s $860 a fortnight job was counted — the wife in that example was regarded as earning $466 a fortnight for the income test. Normally that level of counted income would reduce her pension by about $169 a fortnight, although the adviser noted the actual effect can depend on whether she is already receiving the full pension.
How much can a couple earn before the pension is affected under the income test?
Under the income test a couple can earn up to $256 a fortnight without their pension being affected. Any income above that threshold will be assessed and may reduce pension payments.
What asset limits apply to a single, home‑owning pensioner before the age pension is reduced or cut out?
A single, home‑owning pensioner can have assets up to $181,750 without affecting the pension. Once assets exceed that limit the fortnightly pension is reduced by $1.50 for every $1,000 of excess assets, and the pension ceases when assets exceed $659,250.
What are the asset limits for a single, non‑home‑owning pensioner?
A single, non‑home‑owning pensioner can have assets up to $313,250 with no effect on the pension. The pension cuts out once their assets exceed $790,750.
How much income can a single pensioner earn before their age pension is reduced or stops?
A single pensioner can earn up to $146 a fortnight without the pension being affected. Above that amount the pension is reduced (the article states a reduction of 50 cents for each dollar above the limit), and the age pension stops altogether once a single pensioner’s income reaches $1,578.20 a fortnight.
Where can I get more personalised help or ask further questions about Centrelink pension rules?
The article suggests emailing questions to super@taxbiz.com.au for further advice. It also references the book 'Self‑Managed Superannuation Funds: A Survival Guide' by Max Newnham as an additional resource.
Call 1300 880 160
Start a chat
Schedule a call
