Centerlink Strategies

Introduction

Centerlink pays centerlink benefits, pensions, to pensioners subject to the pensioners not exceeding income and assets thresholds. A Super accumulation account is not included in the income and asset threshold’s where the person is below the “Age Pension” age. For males the age pension age is 65 and for females it is based on their date of birth:

1. less than 30.06.44=63yoa; and

2. greater than 1.7.44 but less than 31.12.45=63.5; 

3. greater than 1.1.46 but less than 30.06.47=64yoa; 

4. greater than 1.7.47 but less than 31.12.48=64.5yoa; and 

5. greater than 1.1.49=65yoa. 

Above these ages the Accumulation account will be subject to the Age Pension Tests to determine what, if any, the Age Pension must be reduced by. A Account Based Pension will also be subject to the Age Pension Tests.

Age Pension Tests – Income & Assets

To demonstrate the effect of exceeding or being below the income and asset threshold tests we shall use an Example. Roger is 67, past pension age of 65, and has a SMSF accumulation account of $100,000.

Assets test – see <table of rates> for the assets threshold levels. In our example the <table of rates> at time of writing tells us that for a single pensioner who does not own a home, the Pension Asset test is less than $321,750 with the age pension cutting out completely after exceeding the threshold of $808,000. Therefore in our example Roger receives the full pension as his account balance of $100,000 is less than $321,750, subject to also meeting the income test shown below.

Certain pensions are exempt from the assets test, these are Market linked/term allocated pensions, complying life time pensions, complying fixed term pensions.

Income test – see <centerlink rates> for the income threshold levels. In calculating the which of the income tests apply it must be determined whether the Superannuation Account in (1) accumulation or (2) pension phase, as in many cases the pension account will provide a more favourable outcome.

1. Accumulation Interest – means the deeming income rules apply to calculate the income under the income test.  Deeming on the account balance of $100,000 is as follows:
   $43,200 x 3% + $100,000-$43,200 x 4.5% = $3,852 or $148 per ft, the allowance for the full pension is $150 per fortnight therefore the full age pension can continue to be received. The test is usually more favourable if the accumulation account converts to pension mode,
2. Pension Interests – If converted to pension mode then the following formula applies: Annual Rate of Ordinary Income = Annual Payment – Purchase price/relevant no:

Using the above Example:

As the income test shows an income of $211.75 pa or $8.14pf which is less than the threshold of $150pf.

Planning Opportunity – If Roger’s Accumulation Account balance was $190,000 it would still be lower than the asset test threshold but the accumulation account and deeming income test would result in a reduced age pension with a deeming income of $304pf ($7,902pa) which exceeds the minimum  threshold of $150pf and therefore his Age pension  would decrease. However, as the pension interests has a more favourable outcome Roger could covert the Accumulation interest to a pension. In this instance and applying the Pension formula for determining the deemed income is $1,875 (11,585-11183=$402.32pa or $15.47pf. Roger is deemed to have received income of $15.47pf which is less than the threshold of $150 meaning he is entitled to receiving the full age pension. Roger could have had a pension up to the maximum amount of the assts threshold applicable to Roger of $321,750 and still have been under the income test threshold of $150pf and received the full pension.

To read more about the centerlink age pension see <income tests>, <assets tests> and for more  <centerlink age penision>.