From new rates to increased eligibility: Upcoming changes to the Age Pension you need to know

A big jump in Centrelink pension payment rates has flowed through to means test thresholds, which means some seniors might qualify for a part-pension for the first time. Others are likely to see a big lift in their fortnightly pensions.

The regular indexation of payment rates coupled with lingering high inflation in the first half of the year, means single age pensioners will receive a $32.70 a fortnight increase from 20 September 2023 with couples receiving an extra $24.70 a fortnight each or a combined $49.40 a fortnight.

These increases immediately flow through to the upper cut-off thresholds which means thousands of seniors may now come under the thresholds and be eligible for a part-pension for the first time.

Even if you’re within a few thousand dollars of these limits, there are legitimate and legal things you can do to drag you under the thresholds. And make no mistake, being eligible for a part-pension is not to be sneezed at.

How much can I receive on the part-pension?

A quirk in the system means that the minimum amount you can receive as a single is $57.20 a fortnight or $1,487.20 per annum and $43.10 each for members of a couple. That translates to a combined $86.20 a fortnight or $2,241.20 per annum for couples.

That’s before you take into account the considerable discounts that come with holding a mauve Pension Concession card. This card allows you to access PBS listed drugs at $7.30 a script and a suite of government discounts on utilities and charges. In fact, the Association of Independent retirees has previously valued the card at up to $7,000 a year in savings, depending on your situation  and before we include the discounts offered by businesses.

Under Centrelink’s income test, a single can now earn $2,397.40 of Centrelink assessable income per fortnight before being kicked off the pension because of the income test. For couples, the combined amount is $3,666.80 a fortnight. In this case, because Centrelink regard couples as a single entity, all that income could be generated by one member of a couple.

How does Centrelink assess your income?

What’s crucial and often misunderstood is that your taxable income or cashflow is not how Centrelink assess income. For example, withdrawals from investments such as share sales, dividend payments, bank interest, super withdrawals or Account Based Pension Payments do not count.

Instead, all of these financial investments plus cash, bullion and gifts over $10,000 are clumped together and the grand total is deemed to be earning a notional rate of interest set by the government.

Currently and frozen until July next year, the first $60,400 of the total for a single, is deemed to be earning just 0.25 percent and the balance, 2.25%. These days, you can easily beat the deeming rates by shopping around with different banks. For couples the combined lower income means-test threshold is $100,200 and above this again, the total is deemed to be earning 2.25%.

The grand annual total of deemed income is divided by 26 to give a fortnightly amount. Added to this is net rental income from property and any employment income that exceeds $300 a fortnight. There’s a special covid bonus of $4,000 still in play until the end of 2023 which means even less employment income counts.

In theory, a single could have nearly $2.8 Million and a couple, a combined $4.3 Million in financial assets before being kicked off under the income test. In reality however, the nastier of the two tests kicks in well before that level is reached.

The Asset test sees your pension clipped by $3 a fortnight for each $1,000 over the lower asset test threshold.

With the September 20 changes however, a home-owning single can now have up to $667,500 before losing their part pension and home-owning couples an amazing $1.003 Million.

Remember, your home is not included in means testing no matter how much it is worth, provided it sits on less than 2 hectares and is used for private purposes.

Non home-owners are permitted an additional $242,000. Presumably, the government figures you can buy a house for this amount, somewhere in Australia.

What happens if you miss out and what can you do to improve your pension payment?

If you just miss out, usually because of the asset test, there’s things you can do to enhance your life and possibly improve your pension payment from Centrelink.

You can start by spending it! Here’s some things to think about:

1. Under the asset test, each $1,000 spent on a trip or other non-asset potentially earns you an extra $3 a fortnight. That’s equivalent to 7.8 per cent annually, courtesy of Centrelink, for life!
2. If you buy a new car or caravan, remember that it depreciates the moment it leaves the yard. Typically, you can depreciate the value by 20 percent per year. So, a $100,000 new car purchase, instantly becomes an $80,000 asset for Centrelink purposes.
3. You can even jazz up the house! Because your home is specifically exempt, spending the money on a new kitchen, second story or getting the place painted, moves the asset from an assessed area (like your super fund) into an exempt asset, your home. Your kids could benefit too, because the value of the house and their inheritance, could be enhanced when you eventually, shuffle off.
4. You can give money to your loved ones or others. There’s no limit on your generosity but you should understand that Centrelink will only decrease your assets by $10,000 per year with a maximum of $30,000 over a rolling 5 year period,
5. You can pre-pay your funeral. Now there’s a fun thought! The truth is, if you pre-pay your funeral either directly to a funeral director or a special funeral fund (limited to $15,000 per person this way) you’ve covered off an inevitable expense. The money you spend on a pre-paid funeral is exempt from future means testing.

All perfectly legitimate and legal ways to boost your pension.

Do you have any questions for our finance expert? Submit them here.

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.