How pensions are protected from inflation September 16th, 2022
While Australia’s runaway inflation rate continues to eat into most households’ disposable income, those receiving government income support from Centrelink continue to be partially protected.
That’s thanks to automatic six-monthly increases linked to key measures produced by the Australian Bureau of Statistics.
Pensions are linked to one of the three measures and whichever measure produces the biggest lift over a six-month period is the one that will be latched onto by Centrelink:
- The age pension is tied to the 25 percent of Male Total Average Weekly earnings.
- It is tested against the Consumer Price Index or CPI
- Finally, there’s a special Pensioner and Beneficiary Cost of Living Index that excludes things like mortgage payments.
The pension increase and when it will come
This time around, from September 20, Pensions and Allowances which includes payments like Jobseeker will see a significant 3.9 percent rise tied to the Consumer Price Index.
Rises always go through on the 20th of March and September every year.
The fortnightly pension for a single will sail through the $1,000 per fortnight level to a total of $1026.50 per fortnight. Age Pension couples will receive a fortnightly pension payment of $773.80 each or a combined $1,547.60 a fortnight.
That means that if only one member of a couple qualifies, you could receive up to $773.40 a fortnight.
Allowances vary depending on the family situation but for a single over 22 years of age with no children, the full amount including the energy supplement increases to a total of $677.20 per fortnight.
What increases mean for the asset and income tests
A lift in the payment rate also has an effect on the maximum amount a senior can earn or have in assets.
Under the means testing system whichever means test produces the lowest pension payable is the one Centrelink will latch onto.
You could pass on one test and fail on the other.
Income Thresholds
Under the income test, a single-age pensioner can now earn up to $2,243 a fortnight and still qualify for a part pension.
Couples can now earn a combined $3,431.20 a fortnight. Centrelink treats couples as a single entity for means test purposes so this total could be earned by one member of a couple.
Centrelink assessable income is not the same as taxable income and instead, uses a complicated deemed income system for most financial investments.
Many are surprised to discover that regular payments from an ABP or withdrawals from super are not counted as income for Centrelink purposes.
Asset Thresholds
The Asset test cut-off threshold for a home-owning single pensioner increases to $622,250 and for couples, a combined $915,500. This figure excludes the value of the home and land, provided it is used for private purposes only and sits on less than 2 hectares.
Non-home-owners are allowed an additional $224,500 in assets.
In the table below, you can see the lower and upper thresholds for each test.
Asset Tests
| Asset test | Home Owner Lower Limit | Home Owner Upper Cut-off Limit |
|---|---|---|
| Single | $ 280,000 | $ 622,250 |
| Couples Combined | $ 419,000 | $ 935,000 |
| Non Homeowner Lower Limit | Non Homeowner Upper Cut-off Limit | |
| Single | $ 504,500 | $ 846,750 |
| Couples Combined | $ 643,500 | $ 1,159,500 |
Income Tests
| Income Test | Income Per Fortnight before reduction | Annual Income before reduction | Upper Cut-off Limit per fortnight | Upper Cut-off limit annual | With Working Credit Bonus Including "Special" $4,000 |
|---|---|---|---|---|---|
| Single | $ 190.00 | $ 4,940.00 | $ 2,243.00 | $ 58,318.00 | $ 70,118.00 |
| Couples combined | $ 336.00 | $ 8,736.00 | $ 3,431.20 | $ 89,211.20 | $ 112,811.20 |