Pensions

The Age Pension and the Disability Support pension provide financial support for eligible Australians who have reached 65 years or who have a physical, psychiatric or intellectual condition that prevents them from working or who are permanently blind.

Age Pension

Eligibility (ss 7, 23, 43 SS Act)

To be eligible for the Age Pension, a person must have reached pension age according to gender and date of birth. (For more details, see s 23(5A), (5B), (5C), (5D) SS Act.) To be eligible, a person must also be an “Austalian resident” – that is, a citizen, permanent resident or holder of a “protected” special category visa (subclass 444) who is “residing in Australia” (this requires establishing and maintaining ties with Australia – see s 7 for more details). A New Zealand citizen is a protected special category visa holder if they arrived in Australia before 26 February 2001.

A person must also be in Australia when claiming the Age Pension, unless claiming under an international agreement.

In addition, to be eligible for the Age Pension, a person must have been an Australian resident for at least 10 years in total, including one continuous period of at least five years. A person may be exempt from this if they live in Australia and arrived as a refugee or are a family member of a refugee. A woman whose partner has died may also be exempt from the 10-year residence requirement.

A person may be treated as living in Australia even during extensive periods overseas. However, people can return to Australia after extensive periods and be found not to have Australian residence.

Residency requirements may also be modified by agreements with other countries (seeInternational agreements”). This is a complex area and any specific queries should be taken to a community legal centre, Victoria Legal Aid or a private solicitor (see Legal services that can help). For specific information about eligibility for the Age Pension, contact Centrelink (see “More information”).

Rate of payment (ss 55, 1064, 1065 SS Act)

The Age Pension has two basic rates: one rate for single pensioners and another rate for partnered pensioners. Although, if a couple is separated by illness, they may each receive the single rate. Rates are adjusted every six months and may be reduced depending on the pensioner’s (or their partner’s) income or assets. Payments may be reduced to nil if the value of the pensioner’s (or their partner’s) income or assets reach the threshold, unless hardship provisions apply or the pensioner is permanently blind (see “Income and assets tests for pensions”).

A pensioner may also be eligible for Rent Assistance (seeRent Assistance (s 1070–1070X SS Act)”) and other supplements that increase the pension above the standard rate.

Pension Bonus Scheme

Eligibility (s 92C SS Act)

The Pension Bonus Scheme is closed to new entrants who did not qualify for the Age Pension before 20 September 2009 (s 92J).

Carer Payment

Eligibility (ss 7, 197–198Q SS Act

A person may be paid a Carer Payment if they provide constant care, including supervision, in the care receiver’s own home to:

a disabled adult, or a disabled adult and a dependent child (s 198 SS Act);

a child with a “severe disability” or a “severe medical condition” (s 197B);

two or more children with a disability or medical condition (s 197C);

a disabled adult and one or more children each with a disability or medical condition (s 197D);

a child who has a terminal condition (s 197E);

a child with a severe disability or severe medical condition on a short-term or episodic basis (s 197G); or

a “profoundly disabled child”, or two or more “disabled children” (pre-1 July 2009 saved cases).

A person may be paid a Carer Payment if they exchange care, under a parenting plan, of two or more children each with a disability or medical condition (s 197F).

The carer and the care receiver must be Australian residents. Although, residency requirements may be modified by agreements with other countries (see “International agreements”).

Carer Payment claims from people who care for children with disabilities or medical conditions are assessed against the “Disability Care Load Assessment (Child) Determination”. Both the carer and a health professional who is treating the child fill-in a questionnaire, then the claim is assessed based on the child’s care needs, as reported by the carer and the professional in the questionnaire.

To receive a Carer Payment to care for a disabled adult, the adult must be assessed under the Adult Disability Assessment Tool (ADAT). This assessment involves the carer and a treating health professional each filling in a questionnaire. Their responses are scored to determine the carer’s eligibility for the payment.

A person cannot receive a Carer Payment and another income support payment. However, the person may be entitled to other payments (e.g. the Carer Allowance or Family Tax Benefit). A person who receives a Carer Payment for a disabled child should also be entitled to the Carer Allowance.

Also, the person being cared for must meet the care receiver income and assets test. And, the carer is not obliged to live with the care receiver; only to provide constant care in the care receiver’s home.

A person receiving a Carer Payment is entitled to receive payment for up to 63 days per calendar year. Carers continue to be paid while they take respite from care and while they are absent “for any special reason in the particular case” (s 198AC(3)) that Centrelink considers appropriate.

Rate of payment (ss 210, 1064 SS Act)

The basic rates of the Carer Payment and the Age Pension are the same. The rate of the Carer Payment is subject to the pension income or assets test (see “Income and assets tests for pensions”). A pensioner may also be eligible for Rent Assistance and other supplements that increase the pension above the standard rate.

Disability Support Pension

Eligibility (ss 7, 94, 95 SS Act)

To be eligible for the Disability Support Pension, a person must be an Australian resident and be aged between 16 and Age Pension age.

A person must also:

be permanently blind (s 95(1)(a) SS Act); or

have a permanent physical, intellectual or psychiatric impairment rated at least 20 points under the impairment tables and a “continuing inability to work” (s 94(2)).

To be eligible, a person must also be living in Australia when claiming the pension, unless claiming under an international agreement.

However, a person can be absent from Australia if they are a terminally ill disability support pensioner (s 1218AA (1)(a)–(e)) or “severely impaired” (s 1218AAA(1)).

There is no “qualifying residence” requirement if the person is an Australian resident when they become permanently blind or begin to have a continuing inability to work, or if they are a dependent child of an Australian resident when one of these events occurs. If the blindness or impairment and inability to work occurred before the person became an Australian resident, or during a period of non-residence, they must have either 10 years qualifying residence or a qualifying residence exemption.

The impairment tables in the Social Security (Tables for the Assessment of Work-related Impairment for Disability Support Pension) Determination (2011) measure the functional impact of any permanent medical condition.

Once a condition has been “fully diagnosed, treated and stabilised”, it is accepted as being permanent if it is likely to persist for at least two years from the date the claim is lodged with Centrelink. Impairment ratings are allocated following a Job Capacity Assessment arranged by Centrelink.

A continuing inability to work means an inability to do any work or training activity for at least two years. Or, if a person can undertake a training activity, that it won’t equip the person for work within two years.

“Work” is defined as employment for at least 15 hours a week (since 1 July 2006) at award wages or above. The work must be in Australia (even if not locally available).

A person who is permanently blind qualifies for Disability Support Pension without having to satisfy the “continuing inability to work” requirement.

If the person does not have a severe impairment (i.e. 20 points under one impairment table) they must also show that they have actively participated in a “program of support” for 18 months in the three years before lodging their claim.

A “program of support” is a program designed to assist people to find, prepare for and maintain work, and is wholly or partly Commonwealth-funded. There are guidelines to assist Centrelink to determine whether a person has actively participated in such a program. If a person’s condition(s) prevents them from improving their capacity to find and maintain work, and therefore, they are unable to participate in a program of support, they can be exempted from this requirement. Other exemptions also apply to the participation requirement; see the Social Security (Active Participation for Disability Support Pension) Determination (2014).

Rate of payment (ss 117, 1064, 1065, 1066A, 1066B SS Act)

Except for single pensioners aged under 21 with no children, the basic rates of the Disability Support Pension are the same as for the Age Pension. The rate of pension payable to those under 21 depends on the person’s age and living arrangements.

A pensioner may also be eligible for Rent Assistance and other supplements that increase the pension above the standard rate.

Disability Support Pension rates are subject to the pension income or assets test, unless the pensioner is permanently blind (seeIncome and assets tests for pensions”).

Income and assets tests for pensions

The rates of pensions are subject to the income test or the assets test, unless the pensioner is permanently blind. Where a person has both income and assets, the test that produces the lower payment applies.

Income test (ss 8, 1064, 1065, 1066A, 1066B, pt 3.10 SS Act)

Pensioners are permitted to earn additional income. Once this extra income reaches the threshold, their pension payments are reduced. The threshold amount depends on the person’s marital status. For each $1 of income over the threshold, the pension is reduced by 50 cents (singles) or 25 cents each (couples). The threshold is indexed annually.

Employment income is subject to a Work Bonus for pensioners over Age Pension age, except the Parenting Payment (Single). The Work Bonus was introduced to replace the Pension Bonus Scheme and is designed to encourage pensioners of Age Pension age to remain in the workforce by allowing them to earn more income before their pensions are affected. On 1 July 2019, the Work Bonus was extended to also apply to self-employment income from gainful work. The first $300 of income in a fortnight is disregarded from the income test. Also, if a person does not earn money in a fortnight, they may accrue the $300 to offset future earnings from employment (this is called the Work Bonus income bank). A person can accrue up to $7800. This is in addition to the normal allowable income threshold. (Before 1 July 2019, the fortnightly Work Bonus was $250 and the maximum that could be accrued was $6500.)

A permanently blind person can receive the Age Pension or the Disability Support Pension regardless of their income (s 1065 SS Act). However, their income will be assessed if they claim Rent Assistance.

The income of a pensioner’s partner is also relevant income for the purpose of calculating payment rates.

“Income” is defined very broadly in the SS Act; the definition is different to that used for income tax law. Under the SS Act, income includes amounts that are “earned, derived or received for the person’s own use or benefit” and periodical payments or benefits by way of gifts or allowances. “Income amount” means valuable consideration, personal earnings, moneys or profits (whether of a capital nature or not) (s 8). Among others, income includes bank interest, regular superannuation payments and rent paid by tenants. (For workers’ compensation payments, see “Compensation and damages payments”.)

Several types of income are not assessed under the income test, for example:

loans that a person receives;

payments under the SS Act;

emergency relief;

instalment of parental leave pay under the Paid Parental Leave Act 2010 (Cth);

insurance payments for loss of property;

a National Disability Insurance Scheme amount paid under the National Disability Insurance Scheme Act 2013 (Cth); and

refunds from Medicare or health insurance funds.

A list of exempt income is in subsection 8(8) of the SS Act. A periodical payment (e.g. a gift or allowance from a parent, child, brother or sister) is also exempt.

Income is defined as gross income without any reduction (s 1072) except where a person carries on a business when expenses involved in gaining that income may be deducted (ss 1074, 1075).

Deeming rules apply to income from “financial investments” (s 9), regardless of the actual income earned, unless a deeming exemption is obtained. Some financial investments may be exempt by the relevant government minister (s 1084).

Generally, the values of all the person’s investments are added together and the assessed in the following way (pt 3.10 SS Act):

the amount under the threshold is deemed to earn 1.75 per cent interest; and

the amount over the threshold is deemed to earn 3.25 per cent interest.


NOTE

The deeming rates and thresholds change periodically. Check with Centrelink for current rates.


The assessed income from application of the deeming rules is used in calculating the person’s pension rate; returns above the deeming rate are not counted as income. The deeming rules apply to pension, benefit and allowance payments.

This is a complex area and any specific queries should be taken to a community legal centre, Victoria Legal Aid or a solicitor (see Legal services that can help). Centrelink also offers a free confidential Financial Information Service.

Assets test (s 11, pt 3.12 SS Act)

A pension is reduced under the assets test if the total net value of the person’s property or assets (apart from their principal home) exceeds the relevant limit, which changes annually.

For each $1000 of assets in excess of the limit, the fortnightly pension is reduced by $1.50 per fortnight (single and couple combined).

A permanently blind person receives the Age Pension or the Disability Support Pension, regardless of their assets. The value of a permanently blind person’s assets is only relevant if they claim Rent Assistance.

The value of a person’s assets is generally the current market value – the amount the asset could be sold for less any debts owed on the asset – and is not the replacement value or the original cost.

There are many things excluded from the assets test including the principal home (provided the person is living in it) and surrounding land of up to two hectares, provided the land is used primarily for private or domestic purposes.

A person who has reached Age Pension age whose principal home includes adjacent land over two hectares that is on the same title may be eligible to have their principal home exempt if they satisfy the “extended land use test”. To satisfy this test, the person must have a 20-year continuous attachment to the land and the principal home. They must also have to be making “effective use of the land”, which means that if the land (or part of it) is productive, it is being used to generate income (s 11A(6) SS Act). A list of the assets exempt from the assets test is in section 1118.

The value of an asset may be excluded under the “hardship provisions” if the pensioner cannot sell the asset or use it as security for borrowing (or if it would be unreasonable to expect the pensioner to do so). For the hardship provisions to apply, a person must make a specific claim to Centrelink. Consideration is not automatic.

Even if the hardship provisions apply, the level of pension might still be reduced by the income that could be earned from the asset (ss 1129, 1130). This means that the value of the asset may still affect the rate of pension payable.