John receives a full Age Pension but is about to start some casual work. He wants to know what impact that work will have on his pension and whether he can salary sacrifice into super to limit any reduction in his pension payment.
I have been on the Age Pension for about three years and have been offered a casual position earning about $800 a week. Am I able to salary sacrifice 10 per cent of this income to reduce the effect of the income on my pension? What effect will the income have on my pension? This income will be reduced by $150 to cover board and lodging. My only income will be the pension and this income stream.
A. Because you are of Age Pension age, the value of your super is considered a financial asset. As a result, the increased value of your super will be deemed to earn income and will be assessed when determining your pension payment.
To salary sacrifice into super, you need to pass the work test.
Currently, people aged 65 to 74 must work a minimum of 40 hours in any 30-day period in a financial year in order to keep making contributions to superannuation. That is set to change in July next year.
The asset test limit for a single person receiving a full Age Pension is $456,750. After this point, the pension begins to decrease.
A single person can earn up to $168 per fortnight and still receive a full Age Pension, but if the fortnightly income reaches $1983.20 (excluding the work bonus), the pension will cut out. The work bonus is $250 per fortnight, hence the maximum fortnightly earnings are $1983.20 + $250.
However, if your employment is seasonal or sporadic, you can ‘bank’ your Work Bonus allowance, to a maximum of $6500, which can then be applied when required. This also means that if you have not worked for the whole previous year, you can earn $6500 before your Age Pension is affected. You do not need to apply for the Work Bonus, Centrelink will automatically apply it when your report your income.
From July 2019, an increase to the Pension Work Bonus will allow age pensioners to earn up to an extra $50 per fortnight – or an additional $1300 per annum – without reducing their existing Age Pension entitlement.
The money you pay for board and lodgings will not be exempt from the income test.
For more specific advice, you could make an appointment with a Centrelink Financial Information Services officer to discuss your situation.
If you have a Centrelink question, please send it to [email protected], and we’ll do our best to answer it for you.