Nick Bruining: Here are the new Centrelink asset and income test limits that could get you a part-pension
Hotter-than-expected inflation has flowed through to Centrelink’s means tests. As well as lifting the age pension, higher limits mean you could now get a part-pension. Here’s the new numbers you need to know.
Australia’s hotter-than-expected inflation figures have flowed through to Centrelink’s means tests.
An increase of just over 3.6 per cent across the board lifts the lower thresholds, but also the levels where payments are cut off completely.
It means thousands will now qualify for Centrelink income support payments, including the age pension and allowance payments such as JobSeeker.
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By continuing you agree to our Terms and Privacy Policy.It also means that existing part-pensioners could see a decent lift in their fortnightly pension payments.
Both the income test and the asset test are affected by the increase.
Centrelink’s means-testing system supports a fundamental principle of the Australian retirement income system. If you have the means to either fully or partially fund your own retirement, you are compelled to do so when means tests are applied.
There is an income test and an asset test, and the test which results in the lowest payment is the one used. You could pass on one test and fail on the other.
From July 1, the income-free area for a single pensioner rises from $218 a fortnight to $226. For a couple, the new combined amount will be $396 a fortnight — a $16 increase from the current level of $380.
In addition to this amount, seniors generating employment income have an additional $300-a-fortnight working bonus. Once you exceed these thresholds, payments are reduced at the rate of 50¢ per $1 for singles, or 25¢ each for couples until the pension is cancelled.
For singles without employment income, that figure is now $2627 a fortnight, and for couples a combined $4016.80.
Centrelink-assessable income is not the same as Australian Taxation Office-assessable income. Bank interest, share dividends and withdrawals from super do not count as income for Centrelink purposes.
Regarded as the “nastiest” of the two tests, the asset test thresholds will also see a reasonable increase from July 1.
For a single homeowner, the asset test limit is now $333,000 — an $11,500 increase from the current $321,500. For a home-owning couples, the new limit is $499,000. The value of the home, no matter how much, is completely ignored, provided it sits on a block of less than 2 hectares. Non-homeowners are allowed an additional $267,000 in assets.
In the case of allowance recipients, any amount above these limits means their allowance is cancelled. Note, however, that in addition to the family home, money held in superannuation accumulation phase is also ignored up until the age pension eligibility age of 67.
For pensioners, however, exceeding the asset test thresholds will see your fortnightly pensions reduce by $3 a fortnight for each $1000 over.
It means a home-owning single can now have assessable assets up to $733,500 before losing the pension. For couples it’s a combined $1,102,500. Again, non-homeowners, whether single or a couple, are allowed an additional $267,000 in assets.
The increase also means that people receiving a part-pension should see an increase in their payment rate after the new means tests kick in.
A part-pensioner currently affected by the asset test, for example, could see a $34.50 a fortnightly increase after July 1, assuming there’s been no change in their financial position. That’s because the effects of the $3-per-$1000 asset test reduction are reduced because of the $11,500 increase in allowable assets.
For couples, the increase could be up to $52.50 a fortnight.
People who may have previously missed out should keep an eye on these upper cut-off thresholds. Changing three times a year, many seniors who previously missed out are surprised to see how big the changes to the upper cut-off levels can be.
Just three years ago, the home-owning couples limit was $986,500, and for singles it was $656,500.
Combined with a decline in your investment balances as you spend money in retirement, you now might just qualify for a part-pension.
Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association
