Eligibility for pension can be a twisting road

Centrelink uses deeming rules for financial assets, so you generally don’t report the actual dividends or interest from shares and bank accounts. Listed shares and other financial assets are treated under deeming and a deemed income amount is used for your benefit assessment. However, a rental property that makes a taxable profit is counted as income for Centrelink, while a rental loss is ignored and cannot be used to reduce your overall income for assessment.

Under Centrelink’s deeming rules, the actual income you earn from financial assets (for example, listed shares, term deposits and savings) is ignored and replaced with a deemed rate of income. That means you do not need to declare actual dividends or interest amounts — Centrelink assesses a standard deemed income instead.

If your rental property makes a taxable profit, that profit is counted as income by Centrelink. If your rental property makes a loss for tax purposes, Centrelink ignores that loss — you cannot use a rental loss to reduce your overall income for pension or benefit assessments.

The asset limits for the full age pension are $186,750 for a single person and $265,000 for a couple (assets test). Personal items such as a car and bank balances count toward these limits. For example, if you are single with a $10,000 car and $20,000 in the bank, you could hold up to $156,750 in superannuation and still receive the full pension under the asset test.

If you were born after 1 January 1957, the age pension qualifying age is 67. For example, someone who is 54 today and was born after 1 January 1957 would not be eligible for the age pension until they turn 67.

If your assets exceed the asset-test limit, the age pension is reduced. For every $1,000 of assets above the relevant limit, the pension is reduced by $1.50 a fortnight. Entitlement to the age pension for a single person ceases when assets reach $673,000 (as noted in the example figures).

For income tax purposes, a pension paid from a taxable super fund is tax free once you turn 60. For Centrelink assessment, the treatment differs: if you are eligible for the age pension and you are not receiving an income-stream pension from your super fund, Centrelink applies deeming to the value of your superannuation to work out your assessed income rather than using the actual amount you withdraw.

The rules for pensions paid from super funds — including transition-to-retirement (TTR) pensions — differ between income tax and Centrelink assessment. Tax-wise, a superannuation pension paid after age 60 from a taxable fund is tax free. For Centrelink, the value of your super and whether you are receiving a pension from your fund affect whether deeming rules are applied; specific TTR treatment will depend on whether it is paid as a pension and your eligibility for the age pension.