Boost your eligibility for Centrelink benefits
01 September 2020
By simply tweaking your super you may become entitled to some hefty Centrelink benefits that will help to stretch your disposable income a bit further, this becomes even more beneficial when investment markets are heading south and your income account payments reduce accordingly
In times of economic downturn, like the health and economic impact COVID-19 has had, not only in Australia, but worldwide, self-funded retirees are the one group that experiences the overwhelming impact a market downturn has on their disposable income. You know, it’s never too late to consider all your options in order to make sure you are maximising your options when it comes to your retirement cash flow.
Centrelink plus super
One option, that can save a considerable amount of household expenditure every year, is your eligibility to access the Centrelink Aged Pension. Even if you only get $1 of age pension, you will be entitled to a pensioner concession card and all the benefits and discounts that come with it, such as concessional rates for prescription medicines listed on the Pharmaceutical Benefits Scheme as well as state and territory-based concessions on services such as travel, council rates and utilities. And, if you're already getting a Centrelink Age Pension, it's timely to make sure you are getting as much as you're entitled to receive.
The eligibility age for the Centrelink Age Pension for the 2019/20 year is 66 years.¹
However, by 2023 the age will increase to 67. Currently, the maximum fortnightly age pension including supplements, for 2019/20 is $952.70 ² for a single retiree and $718.10 for a couple, but these amounts are revised every six months in March and September. ³ An income and assets test will be used to work out how much you actually receive.
Let’s take a look at Bob and Julies situation
Bob who is 66 years of age is about to qualify and apply for the age pension, Julie, his wife, is aged 64. Julie gets a Centrelink Disability pension of around $63 per fortnight.
They have modest assets:
Home contents $10k/ Cars $10k/ Bank accounts $30k/ Shares $7k
Bob’s existing BUSSQ Income account has a balance of $535,000 and he draws $20,000 per year, Julie has a Transition to Retirement account with a balance of $235,000 and she draws $9,000 per year. After combining all three incomes they receive a total of around $30,600.
As they need about $45,000 per year to live on, their annual income is short by $15,000 per year and they take occasional lump sums from their Income accounts to meet this shortfall.
With the help of their financial advisor, their retirement income strategy was to stop Julies Transition to Retirement payment and move her income account back to super, as it will stop it being counted by Centrelink as an asset.
In addition, Bob takes a lump sum out of his Income account, tax free as he is over age 60, and it is deposited into Julie’s superannuation account. As she is under the pension age, Centrelink does not count this amount as an asset, or assess it for income purposes. This strategy will reduce what Centrelink count overall, and therefore increase what they receive in Age and Disability Support Pensions.
Doing this has meant that their new fortnightly Centrelink pension payment is $693 each, or combined, about $36,000 per year. Add to this regular monthly income payments of $750 each month from Bob’s Income account, they now meet their $45,000 expenses. But instead of mostly self-funding their retirement costs, with a little strategic planning they are covering the majority of it with a Centrelink Pension each.
When determining whether you are eligible to receive a government pension, Centrelink applies income and asset tests.
Your assets include cash, super, investment properties, loans to family members, cars, household contents, lifestyle assets such as boats or caravans and assets held in private companies or trusts. Typically, the family home is not included in the list as long as it is no more than 2 hectares of land. Special rules apply for rural properties.
Your income includes money from employment, superannuation income and/or annuities and investments. It also includes money from outside Australia.
All government pensions are income and assets tested which means they test how much:
- You earn from your investments such as super, income account, bank accounts, shares, annuities, rental income – the income test, and
- Your assets are worth – the assets test
The test that results in the lower pension rate will be the one that is applied. The Department of Social Services (DSS) regularly reviews and updates the income and assets test limits to work out how much Age Pension you can get. When this happens, your regular payments change. For more information on the Age Pension and Income and Asset Tests, go to https://www.servicesaustralia.gov.au/individuals/services/centrelink/age-pension
Want to find out more?
If you're looking for assistance with your income account payments or eligibility for Centrelink benefits we can help. As a BUSSQ member you have access to personal financial advice on retirement at no extra cost*. BUSSQ members also have access to tailored retirement advice which is charged on a fee for service basis^. Find out more or call us on 1800 692 877.
¹ Source: https://www.servicesaustralia.gov.au/individuals/services/centrelink/age-pension
² As at 24 July 2020. Source: https://www.servicesaustralia.gov.au/individuals/services/centrelink/age-pension/how-much-you-can-get
³ Source: https://www.servicesaustralia.gov.au/individuals/services/centrelink/age-pension/how-much-you-can-get
*Personal advice is limited to BUSSQ products and is advice on insurance, investment choice, contributions and retirement. The cost of this advice is included in the BUSSQ Trustee related costs. ^Tailored retirement advice is advice on retirement income streams and transition to retirement. As this advice extends beyond a member’s BUSSQ super account it is billed on a per hour basis. Advice is provided by Link Advice Pty Ltd (ABN 36 105 811 836 AFSL 258145). This information is general advice only and does not take into account or consider your personal objectives, financial situation or needs. Before acting, you should review the relevant Product Disclosure Statement to ensure you have all the information about the relevant BUSSQ product and how it works and consider the appropriateness of the information to your needs or seek independent advice from a properly qualified professional. Past performance is no guarantee of future performance. Prepared by BUSS (Queensland) Pty Ltd (ABN 15 065 081 281, AFSL 237860) as Trustee for BUSSQ (BUSSQ Fund, ABN 85 571 332 201).
This webpage provides general information only and does not take into account your personal financial situation or needs. Before acting, you should review the Product Disclosure Statement to ensure you have all the information about the relevant BUSSQ product and how it works and consider the appropriateness of the information to your needs or obtain financial advice tailored for your personal circumstances. A Target Market Determination (TMD) document shows the target market of consumers that a product is designed for and can be viewed on our TMD page.