The Age Pension is the main source of financial stability for many retirees in Australia. But the new changes to the income test threshold are shocking the community. Some seniors have found that even small amounts of money from work or investments could greatly lower or even stop their biweekly payments.
The base pension rate hasn’t changed but the income test settings decide how much of that rate a person actually gets. For people who are close to the upper limits, even small increases in income can make a big difference.
This is what is changing who is most at risk, and how pensioners can protect their rights.
How the Income Test Works
There are two tests for the Age Pension: one for income and one for assets. Your entitlement is based on which test gives you the lower payment.
The income test says:
- Income from work is counted
- Included is deemed income from financial assets.
- Pensions from other countries are looked at
- Returns on investments are taken into account
- We look at superannuation income streams.
If income goes over certain levels the pension goes down at a taper rate until it reaches zero.
What is the “Shockwave” about?
Changes to thresholds and deeming settings that have been made recently mean:
- More interest income could mean more deemed income.
- Small part-time jobs can help you pay off your debts faster.
- Couples may reach their combined income limits sooner.
- Small gains on investments can lead to a reevaluation.
- It may be possible to reach payment cut-off points sooner.
For people who are already getting a part pension, this can mean big cuts.
Who Is Most Likely to Miss Payments
The following pensioners are most at risk:
- People who get part of their pension
- Older people who have term deposits or a lot of cash on hand
- People who are retired and work part-time
- Couples looked at together
- People who are close to the income cut-off limits
People who get a full pension and don’t make much extra money are less likely to be affected.
Why small raises in income are important
For every dollar earned above the free area, the income test taper cuts pension payments by a certain amount.
This means:
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- Even small rises in interest rates can make a difference.
- Extra shifts can lower entitlement
- Deemed income may be more than actual income
- Changes can happen on their own during reassessment.
Some retirees say that cuts happen overnight.
What Seniors Really Think
Margaret 72 from Sydney said that her pension went down when interest rates on her savings went up. “I didn’t make much more,” she said, “but it was enough to lower my payment.”
A retiree in Brisbane who worked part-time said he was surprised by how quickly his earnings changed his entitlement. “I thought I was under the limit,” he said.
What the Government Says:
A spokesperson said that regular reviews keep things fair and long-lasting. The spokesperson said, “We look at income and assets to figure out the right rate.”
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But groups that speak out say that thresholds may not fully show how much it costs to live today.
What You Should Do Next
If you are close to the income limits:
- Look over your current deemed income
- Keep an eye on your part-time income
- Check the threshold levels for both singles and couples.
- Let Centrelink know about changes right away.
- If you’re close to cut-offs think about getting financial advice.
Knowing how income affects taper rates can help you avoid unexpected cuts.
Questions and Answers
Has the rate of pensions gone down?
No base rates are still indexed.
What is considered income?
A return on financial assets that is assumed.
Can working part-time lower my pension?
Yes if the income is more than the free area.
Does interest on savings count?
Yes according to deeming rules.
Is it possible to cancel payments completely?
Yes if income goes over the upper limits.
