‘Does the pension count as an income? And can I keep it if I head back to work?’

Q: I am 73 years old and have been receiving a full Age Pension since retiring a year ago. I now wish to commence part-time employment that would give me a gross income of about $42,000 per annum. Would I retain any of my pension, and would it be preferable for me to work as a contractor (I have an ABN)?

A: A single person can earn $53,060 a year before their pension cuts off completely. Irrespective of whether you work as a contractor or as a sole trader, Centrelink will use your taxable income when calculating the income for the income test. It would be worthwhile talking to a tax agent – it may be that a contractor could have access to more tax deductions, which would in turn reduce your taxable income.

You should also be entitled to the Work Bonus that exempts the first $7800 a year of employment income. This will have a big beneficial effect on your pension.

Q: My wife and I are retired. We now each receive an allocated pension from each of our superannuation accounts. We don’t work, so we don’t have any income from work. Recently I had to answer some questions on a form, and one question was “what is our income?” Could you let us know if our allocated pension is classed as income?

A: If you are talking about Centrelink, money in superannuation is assessed under the deeming rules, and a notional income applied to it. This would be then used for the income test. But in most cases income from allocated pensions is tax-free, therefore for tax purposes your allocated pension would not be classed as income.

If you have a question for Starts at 60’s money experts, email it to [email protected].

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.