- Increase of $32.49 per week for single Age Pensioners, and $10.14 for couples (see article ‘$32 per week increase in single Age Pension’)
- Age Pension age to increase to 67 from 2023 (see article ‘Age Pension age set to increase to 67’)
- New index, the Pensioner and Beneficiary Living Cost Index, introduced for adjusting Age Pension (see article ‘$32 per week increase in single Age Pension’)
- Closure of Pension Bonus Scheme from 20 September 2009 (see article ‘Generous Pension Bonus Scheme to close 20/09/09’)
- Harsher income test for Age Pensioners
- Introduction of Work Bonus to encourage work participation by Age Pensioners
Harsher income test for Age Pensioners
In what should a major bureaucratic headache for Centrelink, the income test for the Age Pension is to be made tougher, but not for existing Age Pensioners.
Under the changes to the income test, the Age Pension will be reduced by 50 cents, rather than 40 cents, for every dollar earned above the income level which delivers full Age Pension income (currently $138 per fortnight for singles and $240 per fortnight for couples).
What this means is that the more income you have the faster that your Age Pension will be cut, compared to the old rules. For example, a single Age Pension can earn $38,693 before the Age Pension entitlement disappears, compared to $47,444, before the Budget announcement. A couple on the Age Pension can earn $59,228 before losing the entire Age Pension entitlement, compared to $74,324 under the old rules.
Note that an Age Pensioner must satisfy both an income test and assets test to receive the Age Pension. The Government made no changes to the assets test.
The important feature of this change is that existing Age Pensioners are not subject to the harsher income test. In what sounds like potted policy, current Age Pensioners remain subject to the old rules until they become better off by applying the new rules. When I know how this is going to work, I’ll let you know but the Government has indicated that existing pensioners could be under the old rules for another 10 years. According to the Government, around 70 per cent of all pensioners (including 93 per cent of all single pensioners) will be unaffected by the pension income test change and will move to the new system immediately.
Potentially, Centrelink will be forced to run two systems. This measure is budgeted to save $1.2 billion over four years, but I’m already imagining the cost savings dwindling due to administrative error and ongoing monitoring.
Introduction of Work Bonus for Age Pensioners
The Government has recognised that many Age Pensioners are forced to supplement the Age Pension with part-time work. If an Age Pension receives income from work (not investment income), then only half of the first $500 of fortnightly employment income will count for the income test. In plain English, the first $250 of any employment income is not counted for the income test.
This measure can provide Age Pensioners with a maximum benefit of $125 per week, although the individual also benefits from the extra income from work.