Centrelink assessment when a member of a pensioner couple dies

 

When a member of a pensioner couple dies, the surviving partner’s Age Pension is often reduced as the single rate of pension as well as income and assets tests apply.

Initially, the single rate of pension is determined by the assessment of income and assets in the surviving partner’s name. The rate of pension may then change when the surviving partner advises Centrelink that they are the sole owner of assets that were previously jointly held, or if they inherit assets.

To assist during the bereavement period, Centrelink pays a lump sum bereavement payment if the new single rate of pension is less than the combined couple rate they were previously receiving.

In the months after the death, the surviving partner will be asked to advise their income and asset position. If they become the sole owner of previously jointly held assets or assets are left to them through the deceased’s will, they must advise Centrelink. 

Many couples have ‘I love you’ wills, where they leave all their assets to their partner. This may not always provide the best outcome from a Centrelink perspective as the inherited assets may impact their entitlement. This is an important area to discuss with clients as part of estate planning. 

The surviving partner will be assessed as a single person and may receive a bereavement lump sum to assist during the 14 week bereavement period if the new single rate of pension is less than the combined couple rate they were previously receiving.

The following table compares the single rate of Age Pension and income and assets tests compared to the couple combined rate. 

 

Centrelink only assesses income and assets held in the surviving partner’s name when determining the surviving partner’s rate of Age Pension. This is why it becomes very important how Centrelink have recorded the ownership of assets in their system.

Lump-sum bereavement payment

Where a member of a pensioner couple dies, the surviving partner may receive a lump sum bereavement payment. In general, the lump sum bereavement payment is calculated over 14 weeks from the date of death and is calculated as the difference between:

• Combined couple rate of Age Pension received before death and
• New single rate of pension received by the surviving spouse. 
• Note, if the new single rate of pension received by the surviving spouse is greater than the combined couple rate, a lump sum bereavement payment is not payable. 

If the surviving spouse is eligible for a lump sum bereavement payment, any Age Pension payments paid to the deceased after the date of death during the 14 week bereavement period can be retained by the surviving spouse, however, they will reduce the amount of lump-sum bereavement payment payable. 

For Example

Phillip and Jeanette are a couple receiving an Age Pension of $800 per fortnight combined. 

Unfortunately, Phillip died. As Centrelink was notified straight away, Centrelink paid Phillip until the date of death and did not make any further Age Pension payments. Jeanette is entitled to a lump sum bereavement payment as the new single rate of Age Pension ($300 per fortnight) is less than the combined couple rate. 

The lump-sum bereavement payment is calculated as the difference between the combined couple rate and the new single rate of Age Pension over 14 weeks. Jeanette will receive a lump sum of $3,500 Ie. ($800 - $300) x 7.

Note, if the couple is separated due to ill health and receiving the single rate of Age Pension each when calculating the lump sum bereavement payment, the couple rate of Age Pension in the calculation is determined as if the couple were living together. This effectively reduces the amount of bereavement payment payable. Notifying Centrelink of the death Centrelink can be notified of the death by:

• Calling the Older Australians line on 13 23 00
• Completing an Advice of Death form
• Attending Centrelink office Services Australia will use this information to notify Centrelink, Medicare, Child Support and Aged Care.

As we approach the end of the 2021-22 financial year, it’s an ideal time to look at year-end superannuation strategies and prepare for the new financial year.

Age restrictions and the work test Voluntary super contributions such as salary sacrificed contributions or personal contributions other than downsizer contributions can only be accepted on or before 28 days after the end of the month in which a client turns 75 years old.

Beyond this age, only mandatory employer contributions (e.g. Super Guarantee contributions) and downsizer contributions can be accepted by a super fund.

 

Example: 

Rob turns 75 on 29 June 2022. 

The last day Rob can make a personal super contribution (except for a downsizer contribution) is 28 July 2022. This means that the 2022-23 financial year’s contributions caps can be available to Rob; however: 

• because Rob is aged 75 or over on 1 July 2023, he is not able to use the bring-forward NCC cap. The standard NCC cap of $110,000 is available to Rob in 2022-23 (please refer to Section 4 of this article - Age limit to trigger the bring-forward NCC cap for further details); and 
• if Rob wants to claim a deduction for a personal contribution made in 2022-23 (before 28 July 2022), Rob must meet the work test or work test exemption during the 2022-23 income year.

Work test changes from 1 July 2022. From 1 July 2022, the work test (or work test exemption) requirement is relocated from the super law to the tax law. 

Effectively this means:

• Meeting the work test (or work test exemption) is no longer a condition under the super law1 for a super fund to accept a voluntary super contribution from a member aged 67 to 74. As long as the client is under the upper age limit (i.e. 28 days after the end of the month in which a client turns 75) the super fund can accept a voluntary super contribution from a member

Content courtesy of Colonial First Tech 2022