Common Myths about the Age Pension
Trying to understand the requirements for the Age Pension can be challenging enough without trying to decipher fact from fiction! Below we debunk some of the common misconceptions about the Age Pension that we often hear from our clients.
“I can’t get the Age Pension until I fully retire”
To be eligible for the Age Pension you generally need to be age 67 or older, an Australian resident who has lived in Australia for at least 10 years, and have income and assets below certain limits (see details of Assets Test and Income Test). It is not a requirement that you are retired. You can still work and be eligible for the Age Pension if you meet the eligibility criteria. Your work income may have an impact on your rate of payment, however, in addition to the standard income limits, the Work Bonus lets you earn some employment income without a reduction in your payment.
“I can’t apply until Age Pension age”
Centrelink will allow you to submit your Age Pension application 13 weeks before your Age Pension age. While your payment won’t start until your Age Pension age, lodging early allows time for your application to be processed prior which can take several months. If required, your payment will generally be backdated to your Age Pension age (or lodgment date if later) once your application is processed. There will be no back pay if you procrastinate and would have been entitled to a payment sooner than the date you lodged your application.
“Centrelink automatically knows when something changes, so I don’t have to tell them”
You have an obligation to let Centrelink know when your circumstances change, including (but not limited to) any change in your income and assets, your address or your living situation. Centrelink does not receive information on your situation from institutions such as your bank, your employer or the Australian Taxation Office. If you don’t update within 14 days and it affects your payment you may need to pay an amount back. If you have been underpaid, you will not be backpaid to when the change occurred – only from when you reported it. If you mislead Centrelink on purpose, you may be charged with fraud (no one wants that!). A change in your Age Pension payment is not an indication that they have updated your income and assets as payments can change regularly for many other reasons.
If you have trouble with updating your records online, we offer a Centrelink Assistance Service for our clients, where we can educate you about updating your records in MyGov.
“I can’t gift more than the gifting limits”
Gifting is not just giving away a cash payment, it can also be giving away an asset for no payment or for less than market value or forgiving a loan. The current gifting threshold is $10,000 per financial year, up to a maximum of $30,000 over a rolling 5 years (couple combined or a single pensioner). This does not mean you can’t give higher amounts, however, anything gifted above these amounts will be considered a deprived asset and Centrelink will continue to assess the excess amount for the next five years. Remember of course, if you didn’t gift it, it would remain assessable in any case!
“I won’t get a payment if my partner is under Age Pension age”
It is still possible for one member of a couple to qualify even if the other is not eligible, I.e. not yet Age Pension age or does not meet the residency requirements. It is important however to remember that even if only one member of the couple is applying, Centrelink will still assess your combined assets and income and calculate your payment under the couple threshold and rates.
“I need to include my lifestyle assets at their insured value”
Centrelink requires a garage or quick sale value for lifestyle assets such as home contents, motor vehicles, caravans and boats not the insurance or replacement value. In addition, Centrelink will not automatically reduce these values over time to factor in depreciation, so it is important you review your listed values regularly to ensure that they are still correct.
“I won’t qualify due to my level of assets”
Many clients are surprised to learn how much they can have and still get a part payment and of course all the benefits that go with having a pension card. Even if you don’t qualify when you initially reach Age Pension age, remember the asset and income thresholds do increase overtime, and generally, your assets reduce during retirement, so you may still qualify at a later age. Also, while most people know that their home and up to 2 hectares of land are not included as an asset, there are also other assets and income sources that are either not assessed or assessed at a reduced value.
In Summary
It is important to seek advice before making any major financial decisions. The Age Pension can provide a regular income or supplement your other income to ensure a more secure retirement. We can help you navigate the complexities of the Age Pension as well as many other Centrelink benefits with consideration to your overall financial position. We have extensive knowledge of eligibility requirements, strategies that can maximise your entitlements and looking for other benefits you may qualify for.
