What happens to your Age Pension if you win the lotto?

Margaret has written to me asking what would happen to her Age Pension if she won lotto. She asked about two different types of winnings: a lump sum or a set for life arrangement where you get a regular payment every month for an extended period (say 20 years).

It’s good to separate the two because the impact on your pension eligibility is different depending on the type of winnings.

Let’s start with winning a one-off lump sum payment. For Services Australia purposes, if you receive a lump sum through winnings or gambling, it is not treated as income. However, it may still affect your rate of pension, depending on what you do with it.

For example, if your winnings mean you now have over a million dollars in the bank, then your new bank balance combined with your other assets would almost certainly push you over the asset limit and your pension would cease. If you won $15,000, the increase to your total assets would be smaller and it may not affect your pension rate at all.

Read: Income and asset tests

What you do with the winnings also has a bearing on how they could affect your pension. For example, if the $15,000 was used to clear a credit card debt or pay down the mortgage on your principal home, then it would cease to be an assessable asset the moment it was put on your card or mortgage. If the funds stay in your bank account, or you move them to another investment, then it would be added to your existing financial assets and deemed. If you buy a new car, the car will be assessed as an asset.

Read: How do you clear debt when you’re on an Age Pension?

If you choose to pass some or all of the winnings on to someone else (for example your children or a charity), that’s treated as a gift under our gifting rules.

The other type of winnings, known as set for life, is where you get a regular amount for a set period (such as $20,000 a month for 20 years). Services Australia treats these types of periodic payment as income. The income amount is assessed each time it is paid for the duration of the winnings. For example, if the first payment is received on 1 October 2020 and is paid at $20,000 each month for 10 years, income of $20,000 would be assessed as monthly income from 1 October 2020 until 30 September 2030, inclusive. With winnings of that amount, your income would be too high to receive an Age Pension.

Read: Can my Age Pension be affected by a lump sum payment?

It’s important to remember that if you do receive winnings, either as a lump sum or periodic payments, you need to let Services Australia know. You can tell us about your changes online, using your Centrelink account through myGov or on your Express Plus Centrelink app. You can also call us on 132 300 and talk to a Financial Information Service officer.

Thanks for the question Margaret and good luck to you!

See you next month.

Hank Jongen is general manager of Services Australia.

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Written by Hank Jongen

Hank Jongen is the human face of Centrelink, a government agency on behalf of the Department of Human services, responsible for $100 billion in funds, 40,000 staff and 99% of the Australian population at some stage or another