Calculating your Age Pension – how Centrelink does the sums

You didn’t get an increase in your pension when deeming rates changed! Why? What’s happened? At best you’re perplexed, at worst you’re furious!

No, it’s probably not the fault of some incompetent or overzealous government bureaucrat mucking you around (although, it’s always good to check).

It’s more likely that your wealth status is such that you are not affected by the Age Pension income test.

But hold on, you thought the income test was part of pension means testing?

Confused? Then read on.

How your pension is calculated

Generally, the more wealth you have the less pension you will receive.

There are two tests Centrelink applies to assess your wealth - the income test and the assets test.

After Centrelink applies both the assets and income tests, it gives you a pension based on the test that calculates the lowest pension amount.

What is the assets test?

The assets test is applied to all your assets, except your family home.

A certain amount of these assets is exempt from the test.

This depends on whether you are single or a couple, and whether you own your home or not. This is the assets test threshold.

A taper rate is applied beyond this threshold, which reduces your pension at a rate of $3 per $1,000 of assets.

We are trying to get the taper rate changed because it penalises savers and distorts the system.

Learn more here.

What is the income test?

To assess your income, Centrelink combines all your sources of income to provide a fortnightly estimate.

This includes the income you are deemed to receive from your financial assets.

Financial assets include bank accounts, shares, wages, bonds or managed investments.

The deeming rate applied means it doesn’t matter what you actually earn on your financial assets.

According to the government, your earnings should be in line with the deeming rate. This will be factored into the calculation of your pension.

A taper rate also applies to the income test.

For every $1 of income, you lose 50c of pension per fortnight.

Assets test v income test

If the assets test gives a lower pension, then this will be your pension.

If the income test estimates a lower pension, then this will be your pension.

So, if you didn’t get a change in your pension when the deeming rates changed in late September, it is probably because you are one of the 320,000 part-pensioners whose pension is calculated under the assets test.

Read more about the Age Pension here.

The deeming rates are still too high

Like many of you, we believe the deeming rates are way too high.

Retirees are being excluded from pension payments because the government estimates their income is higher than what bank term deposits are offering.

Help us make a difference. Join our campaign for a fairer retirement income system

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