Centrelink Q&A: What happens if Centrelink gets it wrong?

Eric believes he is being unfairly assessed by Centrelink.

What happens if Centrelink is wrong?

Eric believes he is being unfairly assessed by Centrelink and has asked us whether we can help him figure out if his understanding is correct.


Q. Eric
My wife and I are both age pensioners – I am 83; she’s 72 years old – and we have some superannuation income, with mine being an annuity that ends next month.

We have a mortgaged apartment that we were going to downsize into until the bottom fell out of the market and affected the value of our home, which we do own. We have a tenant in the apartment paying $445 per week.

The apartment is financed on an interest-only mortgage for five years and during this time we hope to be able to sell it and at least break even.

Up until August this year we were each receiving a Centrelink Age Pension. This has been stopped and we are informed that the apartment is now classed as an asset. The value of the apartment, in a subdued market, is currently around $500,000 (we paid $575,000 off plan in 2014) and the interest-only mortgage, which doesn’t get reduced, is for $600,000. All rental income is used to pay the mortgage, agent fees and services, so we receive no income whatsoever from the apartment.

My question is: Should the apartment be assessed seeing that the debt against it is greater than the valuation?

Also, Centrelink have assessed us as having income that equals the rent, which is surely wrong. I have been to Centrelink and discussed this but I don’t seem to get anywhere with them. I have also sent letters explaining the situation fully and don’t even get an acknowledgement of the letters. I am at my wits’ end to get a solution that will restore our Age Pension, as we are getting a bit desperate regarding our living income.

I am sure that any advice you come up with will be of more use than Centrelink’s.


A. First, it’s important to understand that your eligibility for the Age Pension is assessed against both the income and asset test, and that you are paid the lower of the two resulting payments.

Under the asset test, Centrelink uses the market value of the property, which it updates annually. If you feel that the value allocated is too high, you can ask for a valuation at any time.

Any loan amount you owe is deducted from the property value, and the asset test only assesses the amount of the property you actually own.

Under the income test, Centrelink will deduct loan interest payments, rates and property maintenance costs from the income you receive. If you make a loss from the property, then your income will be assessed as zero.

To move forward with Centrelink, you should request confirmation of the test under which your payment is made – asset or income.

Once you have this confirmed, you will be better placed to provide the information needed to either validate that you make a monthly loss based on the income or that you do indeed owe more than the value of the property.

If you are unhappy with the response that you’re given, you can ask for the matter to be escalated and reassessed.

You may also wish to consult a financial planner or accountant with specialist knowledge of Centrelink rules.

All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

If you have a Centrelink question, please send it to newsletters@yourlifechoices.com.au and we’ll do our best to answer it for you.



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    18th Dec 2017
    The value of the apartment being half a million as stated would severely impact someone's
    pension. Had an apartment up north and we were advised to get rid of it. At least now we
    get a part pension. Financial advisor in this case is a must.
    18th Dec 2017
    Centrelink here in Darwin have Financial Advisers on their staff. Twice in the last 20 years I have used them. I was completely honest, taking all relevant papers with me, and they were very helpful and they can do an assessment for you. The advice is free and I knew I was receiving the correct information. It's a better alternative to getting someone who is new to the job or just doesn't understand your position. Good luck.
    18th Dec 2017
    Also make sure of the wording of the mortgage contract. It is possible that the mortgage is not being used to reduce the investment property asset value. As the home is an exempt asset so to is any mortgage ‘against’ the family home.
    18th Dec 2017
    This Gentleman is being stiffed, no doubt. I hope he heeds your advice, a visit to an appropriate accountant would be most beneficial and he go armed with full accounting figures. (or he may have his last tax return if indeed he put one in).
    Old Geezer
    18th Dec 2017
    If the mortgage value is greater than the value of the asset it is disregarded.

    Some Centrelink applications take into account gross rent while others take into account any rent left after expenses.

    Centrelink is full of holes and loop holes so you need to learn the rules before you play the game. eg if it says value of rent received then know whether you should put gross rent or net rent.
    18th Dec 2017
    O G you are spot on about the holes in Centre link when i applied few years back for a part oap ,was given 5 different opinions from 5 different people on whether i was entitled and also not entitled.Final decision was i was not entitled .When i appealed the decision was told i was put on the waiting list which was horrendously. long .took a call from a senators office .Was sorted out in half a day ,finally got a meagre part pension .Maybe when all else fails use your local senators office
    18th Dec 2017
    Depends if the mortgage is on the apartment or on the family home. I suspect the bank would have wanted the security on the highest value asset. That could stuff things up considerably.

    If I were these people I'd be selling whichever property I could as fast as I could and paying off the debt.

    This is insane that OAP are borrowing $600 000 at this stage of their lives. The bank should have told them no.
    18th Dec 2017
    Rae, no bank, nor any lending institution , should ever have the right to advise people on how to live their life. A lending decision should be based on two criteria; is the security sufficient to cover the debt and can the borrowers repay the loan from surplus income.
    18th Dec 2017
    Yes Old Man you are correct. In this case the debt must have been serviced. It really should be up to people and banks to ensure they can sort their debt out themselves.
    18th Dec 2017
    They borrowed more than 100% of the value of the Unit. The only real income they had to service the loan is rent and some super plus the age pension. At their age with no other income, I suspect they were the victims of property spruikers and corrupt loan officers. I agree with Rae that this should never have happened. Now, they will likely have to sell at a loss and could end up homeless even if their part pension is restored
    Old Geezer
    18th Dec 2017
    These people are going to be in trouble when the new landing rules come in where interest only loans have to be converted to interest and principle ones.
    19th Dec 2017
    Yes indeed OG.
    I can't see how the off the plan unit could have been used as collateral. To borrow $600 000 on a $570 000 unit suggests it was at the peak of the lending frenzy or something else happened.

    As an investor and business owner I've borrowed fairly regularly and have always needed to fork up fairly lucrative collateral even for lines of credit and interest only loans.

    I suspect the house was used and that is causing the problem at Centrelink. If prices drop further the bank will be fussing as well.

    Financial booms running on low debt can be disruptive when they end as the "wealth" easily disappears as readily as it appeared.

    People everywhere have this problem now. Real estate worth less than the debt and falling incomes.

    If it was me I'd sell both for what I could get and buy what I could afford after that if the annuity ceases next month.

    I've sold at discount a time or two and it is better to act fast if you suddenly have debt that can't be serviced.

    Cut the losses and move on.

    If you look carefully at your mortgage contract the bank can, and does, make margin calls on property investors. Yes they do.

    18th Dec 2017
    Looks like you have a negative asset and nil income from the investment property going by the info you provided

    Need to grab hold of their assessment workings to see how they come to a different conclusion
    18th Dec 2017
    Tell CL that you are ‘appealing’ the decision. Also that you wish the APPEAL to escalate to the highest level (this is the AAT - Administrative Appeals Tribunal).
    There are 4 levels in their Appeal process. You may not need to go through all levels but stick it out. Only cost to you is ‘time’.
    Pension expert
    18th Dec 2017
    The reality with Centrelink assessments - is that it never a simple as it seems when it comes to assessing assets and discounting loans. If your home has been used as security you are going to lose the "benefit" of having your unit asset reduced by the full loan amount.
    The other unfortunate thing is that only 10% of staff are experts in their individual field of expertise whether it's Pensions or Family Payments or Unemployment benefits - most staff have to be crossed trained so they know a little about a lot of areas as opposed to when I was trained 20 years ago to know a lot about one topic (Age Pension).
    Unfortunately - dealing with Centrelink is only going to get worse as they move front line staff away from contact points - leaving you to go online and on the phone.
    If you keep appealing - you will bump into a staff member that can help you.
    I suspect it's government policy to create a set of circumstances that will make people give up. That should save the government about a Billion dollars.
    Old Geezer
    18th Dec 2017
    I came across a similar situation where they had borrowed against both houses. These people also had some shares. So we told Centrelink that the excess money was borrowed to buy the shares as well as the second dwelling. Centrelink treat each asset as it's on it's own. So if you have borrowed more than it's worth they disregard that extra borrowing even though you may have other assets.
    18th Dec 2017
    You can Appeal to the SST and if that doesn't satisfy then the AAT.They are all Free!
    18th Dec 2017
    It is important for Eric to understand how his real estate is being assessed. The mortgage he has may be apportioned over both properties depending on his mortgage agreement. I would suggest you either phone the Financial Information to discuss or book an appointment with them at your local office. It is a comprehensive and free service. I am sure they will be able to explain the assessment.
    20th Dec 2017
    Ring and make an appointment with Centrelink’s Financial Information Services Officer
    FIS a free service. This officer can look at your financials and offer unbiased assessment. I always suggest people talk to a FIS even pre claiming pension. It is paid for by Federal Government and you do not have to be on a payment to access advic re eligibility and the income asset test. 132300

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