How much can my partner earn before I lose my Age Pension?

I have prepared lots of videos and articles about Age Pension, how the entitlement is calculated and when the Age Pension reduces and why.

But as much as we have rules to follow, very often you can see how the seemingly similar situation can have a totally different outcome.

Today I will give you few examples how a slight change in earned income or value of assets, can make a big impact on your Age Pension eligibility.

I will try to find the answer to the question, that I received from a viewer:
“How much can my partner earn, before I lose my Age Pension?”

Let’s meet Pam and Sam.

• Sam is 67, therefore Sam has reached his Age Pension age and is eligible for Age Pension, Pam is 57, therefore too young for Age Pension.
• They have no financial savings at all, as Sam had a bad accident few years back and all their savings were spent for medical treatments for Sam, and due to health issues he is unable to work any longer
• For this reason, Pam is working double shifts, so she can earn extra and build some savings for them. Pam’s gross income is $120,000
• the only assets they have is home contents of $10,000 and a car valued at $15,000

How much Age Pension would Sam receive with Pam’s income being so high? NIL – Sam is not eligible for any Age Pension due to Pam’s high-income level.

Then Pam admitted being very tired with her working hours and would like to reduce work and be home a bit more with Sam as well.

If Pam reduces her income down to $80,000pa, then Sam is eligible for approx. $60.00pf of Age Pension plus this very important HealthCare Card – the pensioner concession card that provides so many beautiful savings. Just watch this video to understand why this special concession card is so loved by all retirees: “Pensioner Concession Card – the best”

After another year of hard work with long hours, Pam decided to drop hours even further, and consequently her income dropped down to $50,000.

To their surprise, Sam’s Age Pension was increased immediately up to $347pf, which is an annual income of $9,022.

And in the last year pre-retirement, Pam reduced her hours to only earn income of $30,000, which gave Sam the Age Pension payment of $540pf, which is $14,038pa.

So at what point is Sam’s eligible for the full Age Pension payment? What is the maximum that Sam can earn? If Pam’s income is $8,700pa or less, then Sam is eligible for the full Age Pension payment. But that might not be enough to live on. After all one person from a couple only gets $19,354. If the only other income is $8,700, then the total is $28,054pa. Many couples would find this level of income quite restrictive to say the least.

Now let’s meet Steve and Sally

• they are exactly of the same age as Pam and Sam. Steve is 67 and Sally is 57 years old.
• Steve has retired and Sally continues to be working
• They have the following assets: Sam has his account-based pension of $540,000 and they have $100,000 in bank savings account.
• Sally is working full time and earing income of $80,000. So in Pam’s case, when her income was $80,000, her husband Sam was receiving an Age Pension payment of $60pf. In Sally’s case, although her income is exactly the same as Pam’s Steve is not eligible for any Age Pension at all.
• So let’s drop Sally’s income down to $50,000, at this income level Sam was receiving $347pf, so how much would Steve receive? After all his wife’s income is exactly the same – $50,000. But his entitlement is nowhere near $347pf. It is only $227pf – so why is that? It is because all the savings are also part of an Income Test under deeming rules and they additionally reduce Steve’s Age Pension entitlement.
• If Sally’s income drops down to $30,000, this is the time, when Steve can get $375pf, while Sam was eligible for $540pf. Why is this happening? is it again due to the Income Test? No, this time the Asset Test is the prominent test, and when running the two test, we can tell that once Sally’s income drops below $34,000pa, the decrease of her income has no impact on Age Pension improvement, as the Asset Test takes over and reduces the Age Pension entitlement more.
• Therefore Steve and Sally are in the situation where Sally can easily earn up to $34,000 a year with no reduction on Steve’s Age Pension, and the highest Age Pension Steve can get is $375.00pf due to Assets Test.
• Unless…. unless you receive the correct advice how to maximise your Age Pension entitlement. and I have created that incredibly high viewed video: “How to hide assets from Centrelink Age Pension legally” those are just few suggestions, but please ask for the full advice, so you can utilise your money wisely.

And now our last couple Tom and Cath

• again, as you must have guessed, they are the same age as the other two couples
• Tom has retired and Cath is working full time.
• Their assets are different again: they have $30,000 in bank account as an emergency account, Tom has $200,000 in his super and Cath has $410,000 in her super fund. So they have exactly the same assets values as Steve and Sally.
• So we already know that income earned by your younger spouse above $80,000 will reduce the older partner Age Pension eligibility dramatically, and the same happens with Tom and Cath, with Tom being only eligible for $27.00pf.
• If Cath earns $50,000, then Tom would receive approx. $316.00 of Age Pension, so $59pf less then Sam, but $89.00pf more than Steve
• If Cath’s income reduces to $30,000, Tom’s Age Pension amounts to $508.00pf, while Sam’s was $540pf and Steve’s only $347.00pf
• As a matter of fact, Cath can still work part time and earn extra $5,500pa and Tom would be able to receive the full Age Pension benefit, and as I said before, no matter what Steve and Sally do, Steve’s highest Age Pension benefit was $375.00pf, even if Sally stopped working all together. This is because their assets were not set up correctly to maximise Age Pension.

So I hope you can see now how it is possible to have the same level of assets, but not necessarily receive the same government benefit from Age Pension, have the similar level of income and yet, receive a different government benefit outcome. This is where an appropriate advice can assist a great deal.

By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement