How does the income test work?

Reducing your income

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DISCLAIMER

Social security pensions are means tested to ensure that Government support goes to people who are truly needy. There are two means tests - an income test and an assets test. If either of these tests results in a reduction in your pension, the Government will apply the one that gives the greater reduction. For example, if the income test indicates a reduction of $50 per fortnight and the assets test indicates a reduction of $60 per fortnight, your pension will be reduced by $60 per fortnight.

Under the income test, a single pensioner's or pensioner couple's fortnightly benefits are reduced by 40 cents for each dollar that their fortnightly income exceeds certain limits.

The CCH Social Security Income Test Calculator estimates the amount of pension (excluding pharmaceutical allowance) which an eligible pensioner or pensioner couple can receive, after reduction for any income above the income limits. For current income test thresholds, see CCH Financial Planning Navigator; 19-530.

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Retaining their pension eligibility may be important to lower income retirees, not only from an income perspective but also from the perspective of the additional benefits and discounts which are available to aged pensioners.

There are special rules to discourage people from simply giving their money away to relatives or putting it into low-interest bank accounts in order to qualify for the pension. However, a financial adviser may be able to assist by pointing out ways to legally meet the income test or assets test when you might otherwise exceed it by a small amount.

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This calculator and related information are for general guidance only and may not apply to all situations. For more information, contact your Financial Adviser or Centrelink (http://www.centrelink.gov.au/).

Financial advisers may wish to refer to the following CCH publications:

• CCH Financial Planning Navigator;
• CCH Electronic Superannuation Library, see Superannuation Commentary;
• Australian Electronic Master Tax Guide;
• Australian Master Superannuation Guide.

• Australian Master Tax Guide (annual book);
• Australian Master Financial Planning Guide (annual book);
• Australian Master Superannuation Guide (annual book);
• CCH Australian Superannuation Law and Practice (looseleaf subscription).

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This calculator is made available by CCH for use subject to the following:

• the calculator (including its help file) provides general information without taking account of the particular circumstances of any individual;
• it is not, and should not be relied on as, a substitute for appropriate professional advice;
• CCH gives no assurance that the calculator is free of errors or suitable for any user's intended purposes;
• to the extent permitted by law, CCH will not be liable for any damages or loss suffered by the user or anyone else from use of the calculator.

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