Nick Bruining: New Centrelink asset and income test thresholds change on July 1. Here’s how it may affect you

Seniors struggling to make ends meet could soon be hi-fiving each other, with significant increases in Centrelink eligibility thresholds to come into effect from July 1. Thousands of people are likely to qualify for a pension for the first time, and those already on a part-pension could see some sizeable increases in the rate of pension payable. In some cases, as much as $2223 a year. The increases come courtesy of July 1 indexation of Centrelink means-test thresholds which continue to benefit from Australia’s high inflation rate. Pensioners already receiving a full pension won’t see any change. Under the means testing system, pension eligibility is tested against income and assets, and whichever test produces the lowest pension payable is the one used. A person could pass on one test and fail on the other. Under the income test from July 1, Centrelink-assessable income which exceeds $212 a fortnight for singles will see the full pension of $1116.30 a fortnight reduced at the rate of 50¢ per $1 over the limit until it is cancelled altogether when income exceeds $2444.60 a fortnight. This is an $8-a-fortnight increase from the current income-free area of $204. For couples, the new combined income-free area of $372 is a $12 increase on the current level of $360. The full couple’s pension of $841.40 each a fortnight will cut out when combined income exceeds $3737.60. Pensioners who continue working have an additional $300 a fortnight added to their income-free area before the pension starts to get clipped. In the case of couples, each pensioner can access the extra $300 but you can’t share it with your partner. By far the nastier of the two means tests is the asset test. For a single homeowner from July 1, once Centrelink-assessable assets exceed $314,000 the full age pension starts to be reduced at the rate of $3 a fortnight for every $1000 over that limit. The pension gets cancelled altogether once assets exceed $686,250. This is an overall increase in the asset test threshold of $12,250. For homeowning couples, an overall increase of $18,500 means the new lower limit will be $470,000 but the upper cut-off limit will be a whopping $1,031,000. Remember, your private home — no matter how much it is worth — is exempt from the asset test. Non-homeowners, whether singles or couples, will be allowed an extra $252,000 in assets before the asset test starts to bite. The significance of these changes is that if nothing has changed and you are on a part pension from Centrelink, you’re likely to see an increase on July 1. For example, the $12,250 asset test increase for a single asset-tested part-pensioner means the current $3 a fortnight reduction will be reduced by the effects of the increase. In this case, the pension would rise by 12.25 time $3 — or an extra $36.75 a fortnight, unless they reach the maximum pension or the income test takes over. A non-homeowning asset-tested couple benefits from the effective increase of $28,500 in the asset test threshold. That could translate to an extra $85.50 a fortnight. Over the year, that adds up to at least $2223. Remember that between now and July next year, there will be two increases in the amount of pension payable in September and March. One final point. If you benefit from the changes under one test, keep your eye on the other. It could be that the other test now takes over as the dominant means test used in calculating your pension. Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association