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Nick Bruining: Pensioners big winners as Australia’s inflation rate takes off

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Nick BruiningThe West Australian
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The increased benefits are likely to rise again on September 20 in line with requirements under the Social Security Act.
Camera IconThe increased benefits are likely to rise again on September 20 in line with requirements under the Social Security Act. Credit: Ira T. Nicolai/Getty Images

Centrelink income support recipients, including pensioners and jobseekers, are the big winners from Australia’s recent inflation spike, with fortnightly benefit payments increasing by the biggest amount in years.

The fortnightly increases, announced last week, also means that some wealthy seniors who previously missed out on a part-pension will now qualify for the first time.

Age, disability, veteran and blind pensions for singles rose by $20.10 to $987.60 and $15.10 for each person in a couple, giving a combined pension of $1488.80.

Most single-allowance recipients, including Jobseeker, will see payments rise by $13.20 with partnered recipients collecting an extra $12 each.

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The increased benefits are likely to rise again on September 20 in line with requirements under the Social Security Act.

Help with the rent, kind of . . .

Last week’s increases also flow through to other Centrelink payments, including rent assistance. But for those struggling to make ends meet in WA’s white-hot rental market, the increase of about $3 a fortnight will do little to ease the pressure.

Rent assistance ranges from between $97.20 a fortnight up to a maximum of $252.70 depending on your family situation and whether you are sharing with others. Increases are not linked to any rise in the actual rental market but instead, to the consumer price index. CPI was also used to lift all payments this time round and reflects the increase in prices between June and December 2021.

Not all increases are equal

Centrelink pensions are also linked to male total average weekly earnings and a special pensioner beneficiary cost of living index. Whichever increases the most over the six-month period determines the increase.

Allowances like Jobseeker, however, are tied to CPI alone.

An increase in pension payment rates also has an effect on the upper means-test thresholds where pensions are cancelled. Come in under the thresholds and you will qualify for a part-pension of at least $53.20 a fortnight if you’re a single and $40.10 each if you are a couple.

If you qualify for the basic part-pension, you also qualify for a Pension Concession Card which provides hefty discounts on government services ranging from PBS-listed drugs at $6.80 a script through to discounts on local and state government charges.

There is an income test and an asset test, and you need to be under both limits to qualify for the basic part-pension.

For single pensioners, Centrelink assessable income needs to be less than $2155.20 a fortnight. For couples, the combined upper limit is $3297.60. Centrelink don’t routinely segregate income and assets, so all of the income could be earned by one member of a couple.

To qualify for the full pension, income for singles needs to be less than $180 a fortnight and for couples, a combined $320. Over these limits, and the total pension is clipped by 50¢ per dollar until you reach the upper thresholds.

Centrelink assessable income is not the same as taxable income. For example, withdrawals from super, account-based pension payments and even share dividends are not treated as income by Centrelink. Instead, a complicated deemed income amount is applied to your total financial assets.

In most cases, you’ll be kicked off under the asset test before the income test causes you to lose your pension.

The asset test differentiates between homeowners and non-homeowners. Your private home and the 2.5ha it sits on, is completely exempt, no matter what its value. Over and above your home, a single can have assets of $599,750 and qualify for a part-pension under the asset test. That is an increase of $6750 from the week before the increase.

To qualify for a full pension, your assets need to be less than $270,500. Above this level and your fortnightly pension is reduced by $3 per $1000 of assets.

For homeowning couples, combined assets need to be less than $901,500 to qualify for a part-pension. For a full pension, the combined lower-limit is $405,000. These lower limits will be increased in July and are likely to be substantial because they are also linked to CPI.

Given that many super funds and share portfolios have fallen by more than 5 per cent since the payment rates and thresholds were last changed in September 2021, some people might now qualify for the first time.

It’s worth having a look.

GOING UP

Pension (age, disability, veterans and blind)

Per fortnight

  • Single: $987.60
  • Couples combined: $1488.80

Annual

  • Single: $25,677.60
  • Couples combined: $38,708.80

Pension asset test

Homeowner: lower threshold to upper cut-off threshold

  • Single: $270,500 — $599,750
  • Couples combined: $405,000 — $901,500

Non-homeowner: lower threshold to upper cut-off threshold

  • Single: $487,000 — $816,250
  • Couple combined: $621,500 — $1.118m

Pension income test

Income-free area per fortnight

  • Single: $180
  • Couple combined: $320

Income test upper limit where pension is cut-off per fortnight

  • Single: $2155.20
  • Couple combined: $3297.60

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