Pensions

Based on the contribution of Faisal Bakhtiar, Rosalinda Casamento and Olympia Sarrinikolaou, Victoria Legal Aid, as amended by Genevieve Bolton, Executive Director/Principal Solicitor of Canberra Community Law and current to 30 April 2018

Age Pension

Eligibility (ss 7, 23, 43)

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)).

To be eligible, a person must be an “Australian resident” – that is, an Australian 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). Further, a New Zealand citizen is a “protected” special category visa holder if they were in Australia on 26 February 2001.

The person must also be in Australia when claiming the pension, unless claiming under an international agreement.

In addition, the 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 reside in Australia and arrived as a refugee.

A person may be treated as residing 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 (see International agreements). This is a complex area and legal advice should be obtained regarding any specific queries. For specific information regarding Age Pension eligibility, contact Centrelink (see More information).

Rate of payment (ss 55, 1064, 1065)

There are two basic rates of pension: one rate for single pensioners and another rate for partnered pensioners, although if a couple is separated by illness they may each be able to be paid at the single rate. Rates are adjusted every six months and may be reduced if the pensioner (or their partner) has income or assets that bring them under the pension income or assets test, unless they are permanently blind (see Income and assets tests for pensions).

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

Pension Bonus Scheme

Eligibility (s 92C)

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

Carer Payment

Eligibility (ss 7, 197–198Q)

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);
• 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 also 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 claimant and the care receiver must both be Australian residents, although, as with Age Pension, residency requirements may also be modified by agreements with other countries (see International agreements).

Carer Payment claims in respect of children with disabilities or medical conditions are assessed against the “Disability Care Load Assessment (Child) Determination”, which requires an assessment by a “treating health professional”, such as the child’s doctor, registered nurse or registered psychologist.

To receive a Carer Payment to care for a disabled adult, the adult must be assessed under the Adult Disability Assessment Tool (ADAT) on the basis of the responses provided in the treating health professional report. This report may be completed by a doctor, nurse, occupational therapist or an Aged Care Assessment Service.

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

The person being cared for must meet the care receiver income and asset test. There is no obligation to live with the care receiver; only to provide constant care in the care receiver’s home. A person receiving Carer Payment is entitled to receive payment for up to 63 days per calendar year while taking respite from care, or for another period Centrelink considers appropriate “for any special reason in the particular case” (s 198AC(3)).

Rate of payment (ss 210, 1064)

The basic rates of Carer Payment are the same as for the Age Pension. 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)

To be eligible for the Disability Support Pension, the person must be 16 or over, and under pension age when claiming the pension. The person must also:

• be permanently blind (s 95(1)(a)); or
• have a permanent physical, intellectual or psychiatric impairment rated at 20 points or more under the impairment tables, and have a “continuing inability to work” (s 94(2)).

To be eligible a person must be an “Australian resident” and be 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 set out in the Social Security (Tables for the Assessment of Work-related Impairment for Disability Support Pension) Determination (2011) measure the functional effects of any “permanent” medical condition. The tables changed on 1 January 2012; the previous tables apply to applications lodged before that date.

Once a condition has been “fully diagnosed, treated and stabilised”, it is accepted as permanent if it is likely to persist for at least two years. 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 they can undertake a training activity, that it won’t equip the person for such work within two years. “Work” is defined as work that is at least for 15 hours a week (since 1 July 2006) at award wages or above, being work that exists 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 at least one impairment rated at 20 points in an impairment table, they must also show that they have actively participated in a program of support in order to be considered to have a “continuing ability to work”.

A “program of support” is defined as a program that is designed to assist people to find, prepare for and maintain work, and is either wholly or partly Commonwealth-funded. There are guidelines to assist Centrelink to determine whether a person has actively participated in such a program. If the person’s condition made them unable to participate in a program of support and led to its termination, they can be exempted from this requirement.

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

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 (see Income 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)

Pensioners can earn income to a set point before the pension is reduced. The set point depends on the person’s marital status. For each $1 of income over the set point, the pension is reduced by 50 cents (singles) or 25 cents each (couples).

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. The first $250 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 $250 to offset future earnings from employment. A person can accrue up to $6,500. This is in addition to the normal allowable income threshold.

A permanently blind person can receive the Age or Disability Support Pension regardless of income (s 1065).

The income of a pensioner with a partner is equal to half the combined income of the person and their partner.

Income is defined very broadly in the SSA, and is different to the definition for income tax law. It includes amounts that are “earned, derived or received for the person’s own use” 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 other things, 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 SSA;
• 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 SSA. 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).

Income from “financial investments” (s 9), unless exempt by the relevant government minister (s 1084), is assessed in the following way (pt 3.10):

• the value of all the person’s investments are added together;
• investments under the threshold are deemed to earn 1.75 per cent interest; and
• the amount over the threshold is deemed to earn 3.25 per cent.

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, and 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 legal advice should be obtained regarding any specific queries. Centrelink also offers a free confidential Financial Information Service. (see More Information).

Assets test (s 11, pt 3.12)

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

For each $1,000 of assets in excess of the limit, the fortnightly pension is reduced by $3 per fortnight (single and couple combined).

A permanently blind person receives Age or Disability Support Pension, regardless of assets.

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 asset test including the “principal” home (provided the person is living in it), and surrounding land of up to two hectares, special aids for people with a disability, and pre-paid funeral expenses. A list of the assets exempt from the asset test appears 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 pensioner’s use of the asset (ss 1129, 1130). This means that the value of the asset may still affect the rate of pension payable.

A person of Age Pension age who qualifies for Carer Payment or Age Pension or is the partner of such a person, may also be eligible for consideration under the “extended land use test”. They must have a 20-year continuous attachment to the land and principal home. They also have to be making “effective use of the land”, meaning that if the land or part of it is productive, it is being used to generate an income. If successful, all land held on the same title as the principal home, or deemed to be on one title, is exempt from the assets test.