Many Australian retirees receive part or full Age Pension from Centrelink. If eligible, it’s important to know how you can optimise your age pension benefits. The value of your assets and income determine your eligibility and entitlement amount, and your eligibility may alter if there are changes to your financial situation. You can optimise your benefits and potentially change your eligibility by reviewing your current financial situation and updating your asset values in Centrelink.
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Your relationship with Centrelink begins with them applying two different financial assessments; one being the Asset Test, and the other being the Income Test. Centrelink isn’t necessarily your friend here, they look at both test outcomes and base your benefit amount on the one with the highest value. So if your Asset Test shows a higher value worth than your Income Test, your Age Pension benefits will be based on your Asset Test value.
The responsibility of keeping these test records up to date sits with you as the recipient. Centrelink communicate with recipients often, reminding you to update your asset and income values when they increase. An increase in these values would lead to a decrease in entitlements.
Although for obvious reasons, not as much focus is placed on the opposite scenario where markets may have fallen, your asset and income value may have decreased and your entitlements should increase.
Keeping your asset values up to date in Centrelink via your MyGov account allows you to optimise your age pension payments and helps to avoid any over-payments. If you have also been previously excluded from the age pension due to the assets test, updating your asset values may alter your eligibility status.
Given recent market volatility and likely falls in retirement savings, superannuation balances and investments, your assets may have decreased in value to some extent. By updating your current asset values in your MyGov account, you may be eligible for an increase to your pension payments.
If you did not meet the requirements of the assets test and were not previously eligible for the aged pension, you may now be eligible if your assets have decreased in value.
Types of assets Centrelink assesses:
You can read the full list of assets included and excluded in asset test here.
You should update your details with Centrelink anytime your situation or value of assets change and the changes are relatively significant. Centrelink will generally complete a balance update for most recipients annually, commonly in July.
Given the recent market falls and the likely impact on your retirement savings, if you are currently in receipt of part pension benefits due to the assets test, you should request a reassessment by Centrelink as soon as possible. If you are on a part pension, for every $1000 your asset values reduce, you will receive a $3 fortnightly increase to your age pension benefits.
For example, say your retirement account had $500,000 in it at the last update, but due to minor negative returns and the annual pension payments made, your balance is now $450,000. For a balance decrease of $50,000, a home-owning couple’s Age Pension entitlement would likely increase by an estimated $150 per fortnight ($75 per fortnight each). If you do not update your asset and income values with Centrelink in a timely manner, you will miss out on additional entitlements that you are eligible for.
A similar outcome would occur for the opposite; say your retirement fund has increased by $50,000 due to market returns, a home-owning couple’s entitlements would likely decrease by around $150 per fortnight. The difference here is that you should complete a balance update with Centrelink in a timely manner to avoid a bill for calculated entitlement overpayments.
From the 1st of May 2020, the deeming rates used to assess income for those receiving Centrelink benefits have been temporarily reduced by 0.25%. If you have previously not been eligible for the Age Pension due to the income, you may now be eligible if your work has been impacted. If you are already receiving the age pension and it has been affected by your income, your benefits may now increase, and this has been applied automatically.
Other scenarios that should prompt an update:
If you were previously not eligible for age pension benefits due to the assets test and believe you may now be eligible, you will need to retake the assets test. You can do this by working with your financial planner, or you will be prompted for asset details upon application.
If you are already in receipt of age pension benefits, you are obliged to inform Centrelink of changes in value greater than $1000 of financial assets you own directly within 14 days.
Centrelink applies a bulk valuation update for shares in public companies in March and September. However, you are entitled to request a reassessment at any time, updating your asset values to current market value. For any shares you own that are company-issued options or exchange-traded options, the assessable value is the sale price at the time of reassessment.
You can update your asset values and income via your MyGov account. For a step by step guide, visit Centrelink online account help – update your income and assets details.
If you would like assistance with updating your asset values and income with Centrelink, you can visit your local Centrelink office or call 132 300 during business hours Monday to Friday.
Otherwise, if you have a financial planner, your age pension benefits will be just one aspect included in your financial plan. Your planner can help you to update your information and explain the finer details.
If you would like to speak with a financial planner about optimising your age pension benefits and/or updating your asset and income details, please get in touch.
What you need to know
This information is provided by Invest Blue Limited (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
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