The aged pension when you’re a couple

A “couple” means two people, either married or in a de facto relationship. Centrelink requires information about the combined finances for the aged pension.

This creates a layer of complexity along with planning.

• All sources of income, such as wages, investment earnings, rental income, and assets either of you own, such as property, superannuation, savings, etc., are added together for the assets test and count towards one combined total.
• Because couples are expected to share living costs, the system provides different pension rates and thresholds. For example, the maximum Age Pension rate per person for a couple is lower than the single person rate. At the latest rates, a full Age Pension pays about $888.50 per fortnight to each couple member (around $1,777 combined), whereas a single pensioner can get about $1,178.70 per fortnight. So a couple together receives less than two singles would. Likewise, the allowable income and asset limits for a couple, while higher in total than for singles, are not double the single limits; they are lower on a per-person basis to reflect combined expenses.
• Even if only one partner has reached Age Pension age or only one applies for the pension, Centrelink still treats you as a couple for means-testing. The eligible partner will be paid at the couple rate, not the higher single rate, and your combined assets and incomes will determine the payment.

The key takeaway is that being part of a couple means your finances are intertwined, according to Centrelink.

The Age Pension income test looks at the income you and your partner receive from all sources. This includes not just any salary or wages if you’re still working, but also things like net rental income, investment earnings, and even deemed income from financial investments. All these forms of income from both of you are added together for the test.

There is income wiggle room before earnings affect your aged income. For example, if one spouse earns $300 per fortnight from a part-time job and the other earns $80 from investments, the total would be $380/fortnight, which is within the free area and would not reduce their pension.

If your combined income exceeds $380/fn, your pensions will taper down. For couples, the pension reduction is 25 cents for each dollar of combined income above $380 per fortnight, which applies to each partner’s payment.

Effectively, for every $1 over the threshold, the couple loses 50 cents of Age Pension, 25c cut from the husband’s pension and 25c from the wife’s, for example.

To illustrate, suppose a couple has $580 per fortnight of assessable income, which is $200 above the free area. Their Age Pension payments would be reduced by $100 per fortnight, 50¢ x $200 split as $50 less for each partner. A single person with the same $200 excess income would have their one payment reduced by $100, 50¢ x $200 as well. The concepts are similar, but they are just applied jointly for couples.

If your combined income is high enough, it can reduce your Age Pension to $0. For a couple living together, the Age Pension cuts off at around $3,934 per fortnight combined income, approximately $102,284 per year.

The income test does include employment earnings, but the Work Bonus scheme can help pensioners keep more of their pension while working. Under the Work Bonus, the first $300 per fortnight of wages or business income per eligible person is not counted as income. Each member of a pensioner couple can build up this $300/fn credit individually. So if both of you still do some paid work, you each get up to $300/fn disregarded from the income test. Even if you are working and the other isn’t, the worker still gets their $300/fn exemption, though you can’t transfer it to your non-working spouse.

Centrelink automatically applies the Work Bonus if you report employment income, and any unused portion accumulates, up to a limit\ to offset future earnings. This can significantly raise the effective income threshold before your pension reduces. A financial adviser can help you understand how Work Bonus credits apply in your situation.

The income test for couples means looking at joint earnings. The rules are designed so that couples have a higher combined threshold than singles, but not double. The total matters if one partner has all the income and the other has none. Always report both partners’ income to Centrelink, and be mindful that an increase in either of your incomes can affect both of your pension payments.

There’s a lot of misinformation and confusion surrounding Age Pension rules for couples. Let’s clear up a few common myths:
“We each have our own separate limits.” – Incorrect. Centrelink does not give each of you a separate asset or income allowance if you are part of a couple. It assesses your combined resources as one unit, regardless of whether you keep finances separate or whose name assets are in.

“If my partner isn’t Age Pension age, their finances won’t affect my pension.” – This is only partially true. Centrelink will still count any assets and non-super income of a younger partner when assessing the older partner’s entitlement.

“If only one of us applies, they’ll get the single pension.” – No. As long as you are a couple living together in a partnership, an eligible person gets the couple rate of Age Pension, not the single rate, even if their partner isn’t getting a pension.

“Our home will count against us; we should put it in the kids’ names.” Not true. Your principal home is exempt from the assets test.

“We can each earn up to the single income limit before it affects us.” No, a couple has one combined income limit of $380/fn (currently) before pensions taper.

“If we give money to our kids or grandkids, it won’t affect the pension.” Gifting is allowed, but only to a point. Centrelink has strict gifting rules. You can give away up to $10,000 in a single financial year, but with a cap of $30,000 over any rolling five-year period without impacting your pension.

“Once we’re on the pension, we don’t need to think about it anymore.” Be careful: changes in your circumstances can alter your pension rate at any time. As a couple, things like investment market movements, affecting your asset values, cashing out funds, receiving an inheritance, or one of you starting/stopping work can all impact your ongoing eligibility.

As our population ages, there will be continual movement on the Aged Pension. At First Financial, we invest time and resources into understanding the impact of the changes in the aged pension rules on our clients. We look forward to continuing this conversation next month. In the meantime, we are always happy to discuss your retirement planning needs.

At First Financial, we help Australians create retirement plans tailored to individuals and couples. Our experienced advisers can help you make confident, informed decisions. To understand more about how we can help, contact our team today for professional, tailored advice specific to your circumstances.

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