THE amount of age pension a person receives is affected by the assets test and the income test. Several changes have affected how some assets and income are treated. An example of the most recent change relates to the amount of employment income counted once a person reaches pension age.
QI was 65 in late April and my wife was 64 in February. We have asked questions, without success, about how Centrelink considers our super pensions from ComSuper of about $20,000, and $17,000 from ESS Super, for the age pension.
I have a part-time job that will pay me $24,000 from Christmas. What is the amount of income that will be counted by Centrelink for the age pension?
ANot all the pension you receive from your superannuation funds is counted by Centrelink as income. The actual cash you receive is reduced by a purchase price of the pension. This is calculated by dividing the value of your pension when you started it by your life expectancy at that time.
In addition to your super pensions being reduced, not all employment income for people of age-pension age is counted. The first $250 of employment income, over the pension income test limit, is also not counted.
The income level at which the full pension is payable is $150 a fortnight for a single person and $132 each for a couple. In your situation, as there is a high likelihood that the value of your ComSuper pension counted would be more than the $132 limit, $6500 of your employment income would not be counted, leaving $17,500 counted by Centrelink.
QI sold a family farm worth several million dollars about six years ago and distributed all but $300,000 to my children. I am now 89, do not have any other assets, and live with my daughter. Will I be able to claim any amount of the pension?
ACentrelink counts gifts under the assets and deeming rules apply for up to five years. This means only the $300,000 would be counted under the assets test and have deeming applied to assess your eligibility for the pension. You may not be entitled to a full pension but you will get something and therefore should apply.
Q I have a self-managed super fund, the value of which is counted under the assets test by Centrelink. But I understand that if I transfer the balance in my SMSF to a financial institution to receive an annuity, the value transferred will not be counted as an asset for my age pension.
By managing my SMSF I average better rates of return than the financial institutions. Why is it that withdrawals from a complying SMSF are not treated as an annuity and the value excluded as an asset by Centrelink?
AThe exemption for annuities ceased in 2007. To qualify for the exemption you effectively gave your money to a fund manager and had to make do with the pension they paid. On your death, any residual value would go to the fund and not your beneficiaries. In my mind you are better off with your SMSF.
Questions can be emailed to super@taxbiz.com.au
Frequently Asked Questions about this Article…
How does Centrelink count superannuation pensions when assessing the age pension?
Centrelink does not count all of the cash you receive from a superannuation pension as income. The cash payment is reduced by a "purchase price" — calculated by dividing the value of your pension when it started by your life expectancy at that time — and that reduced amount is what Centrelink considers for the age pension income test.
If I work part-time at pension age, how much employment income does Centrelink count towards the age pension?
Not all employment income for people at pension age is counted. Centrelink disregards the first $250 of employment income per fortnight that is over the pension income-test limit (which is equivalent to $6,500 a year). For example, on a $24,000 annual part-time income, $6,500 may be disregarded and $17,500 counted — subject to how your other income (for example, super pensions) interacts with the income test.
What are the income-test thresholds for receiving a full age pension?
According to the article, the income level at which the full pension is payable is $150 a fortnight for a single person and $132 each per fortnight for a couple. If your income exceeds these thresholds, your pension payment may be reduced under the income test.
How does Centrelink treat gifts when assessing the assets test for the age pension?
Centrelink counts gifts for the assets test and applies deeming rules for up to five years after the gift. In the example from the article, someone who kept $300,000 after gifting other proceeds would have that $300,000 counted under the assets test and have deeming applied.
If I gave most of my estate to my children, can I still get any age pension?
Yes — you should still apply. Centrelink counts recent gifts for up to five years, so while you may not qualify for the full pension if your assessed assets or deemed income exceed limits, you may still be entitled to some age pension payment and therefore should lodge an application.
Is the balance of a self-managed super fund (SMSF) counted under the assets test for the age pension?
Yes. The value of a complying SMSF is counted under the Centrelink assets test when assessing age pension eligibility. Withdrawals from a complying SMSF are not treated the same as qualifying annuities for the old exemption.
Will transferring my SMSF balance to an annuity exclude that amount from the Centrelink assets test?
No — the special exemption for certain annuities ended in 2007. Before 2007, you could transfer money to a fund manager and the annuity might have been exempt, but that exemption has ceased. The article suggests the SMSF option may often be preferable under current rules.
How do deeming rules affect money counted by Centrelink when assessing age pension eligibility?
When Centrelink counts cash or assets (including retained gifts) under the assets test, it applies deeming rules to estimate income from those amounts rather than using actual returns. This deeming approach is used to assess your eligibility and pension rate for up to five years after a gift or whenever an amount is counted under the assets test.
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