Claiming government benefits
05 Dec 2012
The main benefit available to retirees is the Age Pension – the taxpayer funded retirement income stream for those who cannot fully support themselves financially. In order to be eligible for the Age Pension, certain criteria must be satisfied, including:
- An age test,
- An income and assets test,
- Residence requirements.
The Age Pension rate depends on whether you are single or have a partner, and is determined by assessing income and assets. This includes superannuation. “The Age Pension is means tested to ensure it goes to those most in need,” explains Pauline Vamos, CEO of The Association of Superannuation Funds of Australia. “The government will look at your income and assets, which includes your superannuation balance, to determine your eligibility and how much you’ll receive.”
Centrelink conducts both an assets and an income test to determine the rate of payment. The assets test compares your assessable assets to the assets test threshold. The income test determines whether your income is within the allowable income amount. The test that results in the lower rate will determine your overall pension qualification.
The final amount of Age Pension paid includes a pharmaceutical allowance, utilities allowance, GST supplement and a telephone allowance. It is reviewed and adjusted according to circumstantial change and is adjusted twice a year with increases in the cost of living.
What about super?
Benefits such as the Age Pension are designed as a ‘safety net’ for individuals who do not have enough superannuation or financial resources to provide adequately for retired life. While superannuation may impact your eligibility for Age Pension, most people will continue to be eligible for a full or part-pension.
You can access your super when you reach preservation age (55 for most people) and retire, when you turn 65, or under the ‘transition to retirement’ rules. ‘Transition to retirement’ means that once you have reached preservation age, you will be able to reduce your working hours and use your superannuation to top up your regular income, gradually transitioning into retirement.
Once you decide to retire and use your superannuation to provide an income, you can choose to withdraw the amount as a lump sum or you can take your super as a pension – a regular income payment. AustralianSuper recommends most people choose a pension. “Superannuation can often be structured in a manner that can maximise your entitlement to Centrelink, even after retirement,” says AustralianSuper’s head of Advice Frank Ceravolo. This will depend on your overall assets.
No matter which way you choose to take your super, it’s important to save. “Having a proper budget in place can generally help to extend your pool of savings,” Pauline Vamos explains. “And applying for even a part-Age Pension if you’re eligible will reduce the drain on your super.”
Other benefits
- Asset Hardship Provisions may be available if you have assets but cannot use them in times of extreme financial hardship.
- Pension Loans Scheme allows people of age pension age to access capital tied up in property assets.
- Carer Payments provide income support if you are unable to support yourself due to the demands of a carer role.
- Commonwealth Seniors Health Card provides access to Australian Government concessions if you’re not eligible for the Age Pension.
- Rent Assistance may be available to those paying rent and receiving a payment or sharing the care of a child.
Work bonus
The work bonus is an incentive for those receiving a pension to participate in the workforce.
How does it work?
The first $250 earned every fortnight is not counted towards your income assessment. If the Work Bonus is not used because you do not work or you earn less than $250 in a fortnight, the amount is accumulated in the Employment Income Concession Bank for you to use next time. Your ‘piggy bank’ has a $6500 limit and carries forward between years, offsetting any other employment.
Earn more than $250 a fortnight?
Your initial fortnightly deduction of $250 will be used. Any other amount that you have accumulated in your ‘piggy bank’ will then be used to reduce your assessable income to $0. If you do not have enough in your bank to reduce your fortnightly income to $0, the normal income assessment test will be applied to the balance.
Who is eligible?
Any pensioner, over Age Pension age is eligible for the Work Bonus.
How to apply
You don’t need to apply for the Work Bonus, it will automatically be applied to you. However, you do need to inform Centrelink of any changes to your earnings.
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