Living on the Age Pension can be tough for older Aussies, with many people trying to live as frugally as possible. But many are unsure what the rules are when it comes to having cash in savings and how this could potentially impact their fortnightly payments.
The pension is assets tested and the amount you are entitled to can be affected if your total holdings surpass the lower thresholds set by the Department of Human Services, as well as if you receive extra income from a part-time job or superannuation fund.
Any savings that you might have in a bank account, along with term deposits or any loans you may have, are classed as a financial investment meaning the sum is included when working out the overall of your assets.
For those on the full rate of pension who are single and own their own home, the assets limit is $258,500, meaning that anything over that amount will impact upon their payments. While single recipients who do not own a property can amass up to $465,500 in assets before seeing a detrimental effect on their fortnightly pension payments.
The amounts differ for couples with the limit for those who own a home being set at $387,500 combined, or $594,500 for couples who do not own a home. These asset test limits remain the same for couples who have been separated due to illness, or when one partner is eligible.
If your assets do exceed the assets test limit then you will lose $3 from each fortnightly payment for every $1,000 you are over the threshold. For example if you are single and own your own home, with assets totally $268,500, which is $10,000 over the limit, your pension will be docked by $30 each fortnight.
For those in receipt of a part pension the rules are different though. Single homeowners can have up to $564,000 of assessable assets, while single non-homeowner can have $771,000. For a couple on part pensions the thresholds are $848,000 for a homeowner and $1,055,000 for a non-homeowner.
If you’re on a part pension and your assets increase to a point where they’re over the threshold, your pension payments will be cancelled.
If you manage to put some money away while you’re on the Age Pension, this is fine as long as the amount you have saved does not tip your assets over the threshold as this would be counted as a change in circumstance, requiring you to declare it to Centrelink. The same rules would then apply as the savings you had built up would be added to your assets.
You must let Centrelink know within 14 days if your circumstances change, for example if you move house, start working or your assets increase or decrease in value, and you can do that in a number of ways. Your details can be updated without having to visit your local Centrelink service centre by either using the Express Plus Centrelink mobile phone app, calling the Centrelink phone self service or via your online myGov account.
If you need to declare a change in circumstance over the festive period, be sure to click the link above to check when Centrelink is open and the best way to contact them over the holidays.