Pensions income and assets tests 108-03010000

Customers are paid under the Income Test or Assets Test, whichever results in a lower payment rate. If certain criteria are met, a customer may be paid under the transitional rules Income Test if entitled to a higher payment rate under this Income Test compared to the rate calculated under the current Income Test.

Income Tests and Assets Tests aim to provide maximum support to customers and reduce support in line with increased capacity of customers to provide for themselves.

From 20 September 2009, all pensioner customers with employment income are assessed over their entitlement period. Customers on variable employment income are required to report earnings fortnightly.

Customers with employment income and who are:

• workforce age - may accrue Working Credits which may affect their payment rate (and their partners) under the Income Test during periods that employment income is earned, derived or received
• Age Pension age - may be entitled to the Work Bonus which allows a deduction to eligible income before the Income Test is applied

In general, total ordinary income below a threshold level is considered to be in an income free area, and does not affect the pension. Above the threshold reduces pension payments at tapered rates.

The Income Test has different applications based on the personal circumstances of pension recipients, that is, single, partnered, pensioner/allowee couple, illness separated couple or pensioner with dependent child/ren. Note: from 20 September 2009, the extra allowable income free area for children only applies to Parenting Payment Single or if the transitional rules for pension customers apply.

Parental Leave Pay (PPL) and Dad and Partner Pay (DAP) received for a child born or entrusted to care on or after 1 October 2016 will be counted as ordinary income for pensions, however the customer does not need to declare this income as it will be automatically included for assessment.

All assets owned by the pensioner must be declared, but some may be treated as exempt assets. There is a distinct cut off point dependent upon relationship status and if they are homeowners or non-homeowners. If the value of the assets exceeds the asset limits, they do not qualify for payment. Hardship provisions may apply if customers are in severe financial hardship, but limits are not increased for dependent children.

The Assets Test presumes that people with substantial assets which produce little or no income, should rearrange their financial affairs before seeking financial support from the community. The intention of any such rearrangement should be to increase their income if possible.

Customers who are granted a pension under an International Agreement and are in receipt of a pension or superannuation payment from that agreement country, may be subject to a direct deduction Income Test.

Certain compensation payments or New Zealand Pension payments may also be subject to direct deduction from the customer's pension entitlement.

A customer may have their pension rate calculated using the transitional rules. The transitional rules will apply if the customer was receiving a pension payment on the 19 September 2009 and has continued to receive a higher rate of payment under the old Income Test rules (taking into consideration any Consumer Price Index (CPI) changes) compared to the new Income Test rules in place from 20 September 2009. If the customer's pension is paid under the transitional rules, the Work Bonus is not used to determine their rate of entitlement under the pre 20 September 2009 Income Test but may still be used to calculate their partner's income support payment entitlement if they are paid under the new income test rules in place from 20 September 2009.

An exempt asset is one that is disregarded under the Assets Test, irrespective of its value. An exempt asset may however have assessable income. For example, the proceeds from the sale of the principal home are an exempt asset but the proceeds when invested are subject to deeming as a financial asset.

There are four broad categories of exempt income. Although exempt income is disregarded as income, the amount received may be an assessable asset and if the funds are invested, deeming provisions apply.

National Disability Insurance Scheme (NDIS) funds paid by the National Disability Insurance Agency (NDIA), whether received periodically or as a lump sum (including interest accrued), which are deposited into an account specifically for the purpose of managing the customer's NDIS plan, are exempt from income and assets tests and deeming. They are not required to be reported or if reported should not be taken into account in the income and asset assessment.