Let’s get one thing absolutely clear at the outset: the Australian Age Pension is a legal entitlement for those who qualify, not a handout.
In the same way those in the workforce should claim every tax-deductible cent they legally can, pensioners owe it to themselves to make sure they’re getting their full entitlement. Here’s how to do it.
“We’re only human,
We’re supposed to make mistakes” – Billy Joel
If you’re getting a part-pension, this step is absolutely crucial. And even if you’re getting a full pension, it doesn’t hurt to know that Centrelink’s records are correct.
Because while I’ve got a lot of respect for Centrelink staff, they don’t always get it right. Even if they have, there’s a chance their records are out of date.
What you need to get from Centrelink is what’s called a ‘Detailed Income and Assets Statement’.
Okay, you could go and queue up at your local branch, but there’s a better way.
Just login to your MyGov account, go to Centrelink, then follow the menu until you find ‘Request a document’. If you’re finding MyGov a bit confusing, then help is at hand. Centrelink produces a short video showing you how to find the information you need.
Once you’ve got your statement, it’s time to get to work. First, sit down with a pen and a highlighter and take a critical look at the value of your assets.
When you first apply for the pension, you’ll be asked for the value of your household contents and personal effects. That includes your couch, your fridge, your clothes, and even the old mower you haven’t got around to fixing. Pretty much everything except your house itself.
Most people think about what they paid, and write down a value of $20,000 or $50,000. You might even have your contents insured for a higher amount.
But we’re not looking for replacement value here. We’re talking market value, which is how much you’d get if you had a garage sale, or listed everything on Gumtree.
Centrelink will happily accept a total value of $5,000; even less if your stuff is getting on in years.
Why bother? Because if you’re affected by the assets tested (which a growing number of retirees are), reducing your assessable assets will increase your pension.
For every $1,000 you can lower your assets, your pension will increase by $78 per annum (single, or a couple combined).
If you lower the value of your household contents from $50,000 to $5,000, that could increase your pension by as much as $135 per fortnight.
Let’s suppose you treated yourself to some new wheels as a retirement present.
If you’d bought something like a Honda Accord in 2016, you’d have paid around $52,000 (plus on road costs). When you lodged your pension claim, you might have said it was worth $45,000 or $50,000.
What about now? According to www.redbook.com.au (a website providing a guide to second-hand prices), you’ll be lucky to get $20,000 if you trade your Honda.
Even if your car is a newer model, there’s a good chance it’s worth less than you think.
If you’re assets tested, that means it’s time to provide Centrelink with a new, lower valuation, and pocket a pension pay rise.
It’s not just a castle, it’s also disregarded by Centrelink for the assets test regardless of how much it’s worth.
I’ve heard stories of people buying a more expensive house to reduce their assessable assets, hence getting more pension, but that seems a bit extravagant to me (the cost of buying and selling property can be huge).
That doesn’t mean you can’t use your existing home to give your pension a boost.
Suppose you need a new kitchen, or your bathroom is getting a bit tired. If you have savings reducing your pension (either because of the assets test, or deemed income from investments), you’re quite entitled to use those funds to improve your home.
If you were planning to update your home ‘in a couple of years’, why not bring that date forward?
I’m not usually a fan of giving money away — it’s too hard to earn the stuff. However, if you have savings earmarked for an inheritance, you could increase your pension by acting now.
Perhaps you’d like to help your kids out, or send some cash to your local dogs’ home. Because it’s your money, there’s nothing to stop you.
Except … Centrelink. Under the current rules, you can give up to $10,000 in a financial year without being penalised (the same limit applies to single pensioners and couples). There’s also a maximum of $30,000 over rolling five-year periods. Therefore, it’s important to get your dates right.
This is one of the last, great loopholes in the system. If you’ve reached pension age and your partner hasn’t, then their superannuation is disregarded under the income and assets tests.
Technically, you could progressively transfer most of your money to your partner’s super fund, and then pick up a full pension. The younger your partner, the longer you’ll get the benefit.
Of course, there’s a lot of trust involved here. You need to make sure your partner isn’t likely to run away with someone their own age, taking all your money with them.
This is a very general guide, and your circumstances could be quite different. Before updating your records with Centrelink, it’s worthwhile having a chat to someone from Centrelink’s Financial Information Service (FIS). It’s free, and you can contact them on 13 23 00.
IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.