Centrelink’s latest increase to pension payment rates should have Starts at Sixty subscribers popping the champagne corks, but it masks an nasty increase to Centrelink’s frozen deeming rates.
A sizeable increase to the fortnightly payment will see thousands of well-healed seniors now qualifying for a payment for the first time.
Government income support payments are indexed twice per year in March and September.
While allowance payments are linked directly to the Consumer Price Index, pensions are increased by either CPI or a special Pensioner and Beneficiary Living Cost Index. Whichever test produces the highest pension is the one used and this figure is then tested against Male Total Average Weekly earnings.
This time round, PBLCI wins the race and the single pension will rise by 2.58 percent or nearly $30 a fortnight from $1,149.00 to $1,178.70 per fortnight, effective September 20.
By comparison, an adult single person receiving an allowance like Jobseeker, can expect a maximum increase of $13.40 a fortnight.
For couples, each member will receive an extra $22.40 lifting the fortnightly amount to $880.50 each or a combined $1,770 per fortnight.
While seniors will welcome the increase, the extra amount also has the effect of lifting the upper cut-of limits for both the income and asset tests.
That translates to many thousands of seniors becoming eligible for a part pension for the first time.
The new upper income test cut-off limit for a single will be $2,575.40 a fortnight which translates to about $66,960 per year. If part of that income is from employment, the upper limit could be as much as $78,760 per annum.
For couples, the combined upper limit rises to $3,934 per fortnight or $102,284. Again, if both of you are working, this limit could be as much as $125,884 per annum.
Centrelink assessable income is not the same as the ATO method of calculation. Employment, foreign pension and some Aussie super pension income is added to net rental receipts from investment properties. To that, add the deemed income from financial investments to work out your fortnightly assessable income.
Applicants will have to satisfy the Asset means test as well. Under the rules, whichever test produces the lowest benefit payable is the one Centrelink’s systems will use.
The Asset test is generally regarded as the harshest of the two. Even so, the September payment increases mean a home-owning Australian couple can now have assets up to $1.074 Million and qualify for a part-pension. For singles, the new upper limit is $714,500. In all cases, the family home, provided it sits on less than 2 hectares and is use for private purposes, is completely exempt, no matter what it is worth.
These represent a sizeable increase of $10,000 for singles and a combined $15,000 for couples.
Under a quirk in the system, someone near the cut-off levels won’t see their part pension dwindle to a couple of dollars a week, as they approach the upper limits.
The fortnightly Centrelink pension payment includes a base pension and pharmaceutical, telephone and other supplements. While the legislation allows tapering of the pension payment, that doesn’t apply to the supplements. You either get the full supplement, or nothing at all.
The minimum you can receive if under the cut-off limits is $59.70 for singles and $45 each or a combined $90 a fortnight when each member of a couple qualifies.
Buried deep in the government announcement was the inevitable increase to Centerlink deeming rates, estimated to affect up to 460,000 seniors receiving an income tested Age Pension.
From September 20, the deeming rates will increase across the board, signalling an end to the Covid inspired freeze on deeming rates.
Deeming rates are used to calculate the notional income earned from Financial Assets for income testing purposes. The lower deeming rate rises from 0.25 percent per annum to 0.75 percent per and the higher rate, from 2.25 percent to 2.75 percent. The higher rate kicks in when total assets exceed $64,200 for singles and a combined $106,200 for couples. A single home owning pensioner with $300,000 in financial assets stands to lose nearly $25 a fortnight.