How separation and divorce affect the Age Pension

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To own or not to own?
When only one person moves out
What to tell Centrelink
We’ve sold the house but I haven’t found a new one yet
What if we haven’t sold or moved yet?
Important message about your safety

Separation and divorce are on the rise in older couples, often after decades together. If you are in an unhappy or difficult relationship and contemplating a split, you may be wondering what will happen to your Age Pension.

Not only that, but you may be unsure about the best way to notify Centrelink of your change in circumstances.

The Age Pension assets test and income test is applied to a couple’s combined resources. It assumes that a couple can and will pool their resources to ensure all their expenses are met. Arguably, expenses for a couple are less per person than expenses for a single person. That’s why the maximum rate of Age Pension for a single person is currently $1,064 per fortnight for homeowners, while a home-owning couple can be paid a maximum of $802 each.

Note: There are also different thresholds at which the pension starts to reduce – and different cut-out points – for singles and couples, and for those who own their own home and those who don’t. What your Age Pension might look like post-separation can vary greatly depending on your circumstances.

Learn more about the Age Pension assets test and income test.

Check out the Age Pension rates and thresholds.

To own or not to own?

The assets test threshold – the point at which your pension payments start to reduce – is different for homeowners and non-homeowners. This is because your home is an exempt asset, that is, it’s not included in the assets test. Non-homeowners don’t have an exempt asset, so their assets test threshold is higher to compensate for their potentially higher housing costs and lack of home equity to draw on in retirement. For a non-homeowner, this means the cut-off limit – the point at which you are not entitled to a part-pension – is also higher, as you can see in the table below:

		Threshold	Cut-off limit
Single	Homeowner	$280,000	$634,750
	Non-Homeowner	$504,500	$859,250
Couple	Homeowner	$419,000	$954,000
	Non-Homeowner	$643,500	$1,178,500

So what happens when you separate, sell and split the money?

Let’s look at an example.

Case study: Johnny and Frances separate and sell up

Johnny and Frances are homeowners with their home valued at $1.2 million. They each have $200,000 in superannuation from which they each take $10,000 of income stream payments. They each have $4,000 of home contents and a $5,000 car. They are getting the maximum rate of Age Pension as a couple ($802 per fortnight each). They decide to separate and sell up and split the proceeds of the sale receiving $600,000 each.

Johnny decides to rent. He now has assets totalling $809,000 (home sale proceeds plus super, home contents and car). As a result:

His Age Pension reduces to $150.50 per fortnight (single pensioner rate for non-homeowner)
He gets Rent Assistance of $157.20 per fortnight
His total Centrelink payment (Age Pension plus Rent Assistance) amounts to $307.70 per fortnight ($8,000 per year).

Johnny will have to pay rent plus afford his ongoing lifestyle expense on a much-reduced Centrelink income. He will need to rely heavily on his financial assets to produce additional income.

Frances decides to buy a unit with her $600,000 sale proceeds (which is exempt from Centrelink’s assets test). She now has assets of $209,000 (super plus home contents and car). As a result:

Her Age Pension increases to $1,064 per fortnight (single pensioner rate for homeowners)
Her total Centrelink payment is $27,664 per year.

Frances still has her superannuation income stream paying $10,000 per year, giving her total annual income of $37,664. She can plan with much more certainty as the Age Pension is doing much of the heavy lifting AND less of her funds are exposed to market volatility than Johnny.

When only one person moves out

Sometimes, there is no plan and one person leaves. Be aware that if you have ownership of your former home, Centrelink will begin to assess your share of the home as an asset. This is because it is only an exempt asset when it is your principal residence.

For the person that remains in the home, you are still a homeowner for Centrelink purposes and the home will remain an exempt asset.

For the person who has left the home, your share becomes an asset from the date you left. If there is a loan secured against the property, the loan balance will reduce the assessable asset value. If your payments are reduced because of this asset, but you are unable to use the asset to generate income, you may be able to ask Centrelink to disregard the home from the assets test, by applying under the ‘assets test hardship provisions’. You will need to discuss your case with a Centrelink officer.

What to tell Centrelink

You will need to tell Centrelink you have separated as soon as possible. You can only be paid a higher rate of payment from the date you advise them – they won’t backpay you if you haven’t told them.

You may also wish to amend ‘permissions’. If your partner has permission to enquire on your record and you no longer wish that to occur, you can tell Centrelink straight away and they will remove this permission immediately.

Good to know: Don’t forget to update your banking details where necessary. Make sure your payments are going to an account that only you have access to.

You will also need to update your financial details with Centrelink and provide documents to show the new information. You need to show the paper trail. For example:

The settlement statement showing details of the sale of your property and how the funds were dispersed
Purchase documents if you have purchased a new home (eg contract of sale)
A copy of your lease if you are now renting
Bank statements showing the sale proceeds deposited and the resulting balance
If you then moved the funds, you will need to provide the corresponding bank statements to show where the funds are now, the deposit and the resulting balance
Any court orders or property settlement agreement
Details of your former home if you still have ownership (eg rates notice, loan documents).

You can advise a separation, a change of address and a change in your assets online. However, sometimes an online update doesn’t affect your record straight away; instead, it requires a Centrelink officer to check the information and action the update. This can take some time. If your rate of payment will be reduced and the update is not actioned straight away you could end up with a debt. To avoid this occurring, you can call Centrelink and ask them to process your changes right away.

We’ve sold the house but I haven’t found a new one yet

If you have sold your principal home, and you intend using the funds to purchase another home to live in, you can have the proceeds that you intend to use exempted from the assets test for a period of up to 24 months, and up to 36 months in special circumstances. You can use this time to look for a suitable alternative, knowing that your pension won’t be affected too much. The money will still be subject to deeming, but it will only be deemed at the lower rate of 0.25% for the time it is an exempt asset.

Note: Only the amount you intend to use for your next purchase can be exempted. You would still be considered a homeowner during the exemption period and the homeowner thresholds would apply.

What if we haven’t sold or moved yet?

It is possible for Centrelink to accept that you have separated and pay you as a single person even if you are still living in the same house.

For example, you may have divided up separate areas of the house, taken steps to separate all your finances and notified family and friends you are no longer a couple. This is a complex area of the Centrelink rules, and there are very strict criteria to decide if you are still a couple or not.

If you believe you are separated but still sharing the same house, you can complete an additional form to have your relationship assessed. The form contains all manner of questions about your relationship to determine how it is different to that of a partnered couple. You will also need to provide details of two people who can verify your situation. You can find further information including a link to the form here .

Important message about your safety

Please note: if you think you may be subjected to domestic violence, there is help available.

Domestic violence can be behaviour that is violent, threatening, controlling or intended to make you feel scared and unsafe. Centrelink has social work services and special processes for people in these situations.

You can ask to speak to a Centrelink social worker to discuss your circumstances by calling your usual payment line or asking in person at a service centre. They will not expect you to do anything that puts you at risk. To access 24/7 support and counselling, call 1800RESPECT on 1800737732. If you are in immediate danger, call 000.

Learn also how superannuation is dealt with in a divorce.