Question 1: My husband can retire in December 2021 but will be working for another six years. Is he eligible for the age pension? He has very little super.
Question 2: How much can you earn without losing access to the full pension?
The preceding two questions relate to Centrelink’s income test, so I will answer these questions together.
Centrelink has both an asset test and income test and uses whichever test gives the lowest amount.
The test used can change over time if your circumstances change.
I addressed some questions related to the asset test in last week’s article.
Under the Centrelink income test for (age or disability) pensions, a single person can earn up to $178 per fortnight and still receive the full age pension.
For every dollar earned above this amount, a single person loses 50 cents in age pension entitlements.
This effectively means you are only gaining 50 cents, or less, as the age pension is taxable, for each dollar earned above $178 per fortnight.
Note that the disability pension is tax free but becomes taxable once you attain age pension age to make it consistent with the age pension.
For a single person, the pension cuts out completely once you earn more than $2066.60 per fortnight.
Meanwhile, couples can earn a combined income of up to $316 per fortnight and still receive the full age pension.
But the pension reduces by 25 cents per person for every dollar earned above this amount.
The pension cuts out completely once the couple earns a combined fortnightly income of $3163.20.
These are the most up-to-date figures as of March 2021.
Many age pensioners have a combination of income sources in addition to their (full or part) age pension, including investment income, superannuation pension income, and part-time work income.
All these income sources are taken into account under the income test.
With regards to superannuation, once you attain age pension age your funds are subject to deeming regardless of whether you retain funds in your ‘normal’ (accumulation) account or convert them to a pension.
However, if you are over age pension age, you may be able to take advantage of the ‘Work Bonus’ if you are still working, or if you return to work.
The Work Bonus provides an incentive for pensioners over age pension age to continue working by allowing them to keep more of their pension when they have income from working.
Under the Work Bonus, the first $300 of fortnightly income is not assessed under the age pension income test. This is in addition to the normal income-free area.
For example, for a couple, normally the first $316 of fortnightly income does not affect your age pension, but with the work bonus, it could be up to $616 per fortnight before your pension payments are affected.
Any unused part of the $300 fortnightly Work Bonus exemption can accrue in a ‘Work Bonus income bank’.
The maximum amount that can be accrued in a Work Bonus income bank is $7800.
The income bank amount offsets future income from work that would otherwise be assessable under the pension income test.
The income bank amount is not time limited; if unused, it carries forward, even across years.
The Work Bonus income bank is useful for pensioners who work seasonal or occasional work.
Income that is eligible for the Work Bonus includes:
- Employment income from paid work. This includes salary and wages
- Gainful work income earned through self-employment – so long as the work involves personal exertion on the part of the person concerned.
As long as you report the work income correctly to Centrelink, the work bonus will automatically apply.
Centrelink can provide you further information, or a financial adviser can provide you with personalised financial advice on these matters.
Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services
Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.
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