Nick Bruining: How spending time overseas when retired can affect your Centrelink pension

As the cost of living in Australia continues to plague household budgets, many seniors have decided to up stumps and relocate to countries where even a basic Centrelink aged pension allows you to live like a king or queen.

Popular destinations beyond Bali include Chiang Mai in Thailand, Medellin in Colombia and even Lisbon in Portugal.

The trick for these overseas adventurers is to keep the dollars flowing in and to not trip over the many rules that apply to Aussies who decide to spend their retirement years living abroad. In most cases, what you are entitled to receive will be less than you thought.

For any pension customer of Services Australia — the department that runs Centrelink — any trip of up to six weeks out of the country is unlikely to see your pension change at all.

However, after six weeks the rate will change. To understand why, you need to understand the separate components that make up your fortnightly payment.

A single pensioner who receives $1096.70 a fortnight is actually receiving three payments rolled into one. The basic pension is $1002.50, but added to this is a pension supplement of $80.10 and an energy supplement of $14.10.

The pension supplement covers a range of separate payments, including the old pharmaceutical allowance, telephone allowance and internet allowance. All are expenses you would incur if living in Australia.

Australian means tests and eligibility rules still apply, even while you are overseas.

If you are gone from Australia for more than six weeks, the theory goes, you don’t need these payments, along with the energy supplement. On that basis, these will stop and you are left with just a basic supplement of $27.80 a fortnight. All up, the most you can receive is $1030.30 a fortnight as a single and $778.60 each as a couple.

More importantly, if you move in with someone, it is highly likely that you would be regarded as a couple and a lower rate will apply. If you don’t notify Services Australia, you will be paid more than you are entitled to and will need to pay it back.

Australian means tests and eligibility rules still apply, even while you are overseas. Remember, too, that Australia now has highly sophisticated data-sharing agreements in place with most countries.

If you move permanently or once you have been away for 26 weeks, a few things will change.

Irrespective of how long you have been here, you will probably no longer be classified as a resident for tax purposes. That can affect a range of things, including taxation when you sell assets.

If you haven’t lived in Australia for a very long time — even though you may be a permanent resident or are now an Australian citizen — a proportionate rule might be applied.

If you have lived in Australia between the ages of 16 and the age pension age for 35 years or more, the rate is unlikely to change. Less than this, it will become a fraction of the full rate, based on how many years you lived here.

If, for example, you immigrated here 10 years ago before you reached age pension age and are now moving overseas, you would be entitled to 10/35 — or about 28.6 per cent — of the lower overseas rate. For a single, this would be about $294 a fortnight.

However, the good news is that as rates rise here in Australia, so too will your payment overseas.

Up to 12 months, you will continue to be paid fortnightly into an Aussie bank account. After that, it will switch to every four weeks and you can then nominate an overseas account if you wish. You will also be able to nominate whether you are paid in the local currency or US Dollars at the prevailing exchange rate.

Lastly, make sure you set up a Services Australia-linked myGov account before you go. That way, you can check to see if you have received any correspondence and you can easily notify Centrelink of changes to your circumstances.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association