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Ask Paul: We're inheriting $95k, will we lose the disability pension?

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Dear Paul,

My husband is on a disability pension and I'm on a carer's pension for him. He is going to receive an inheritance from his father's will of about $95,000.

Will we lose our pensions? - Tania

ask paul clitheroe will we lose our pensions if we inherit $95,000?

I'm sorry to hear about your husband's Dad, Tania. My commiserations to you both.

There are two parts in answering your question.

As I am sure you know, your pensions are determined by an income test. Let's say you pop the $95,000 in a term deposit or high-interest account - that would earn about 5%, so some $4750 a year.

This is roughly $180 a fortnight and as a couple you can earn $360 a fortnight, so if you have no other income, it will not impact your pension. Mind you, you would not lose all your pension until you were earning about $3725 a fortnight.

Then we look at the assets test. Putting aside your family home, as a couple you can have $451,000 in assets to get the full pension, and you would get a part-pension right up to a bit over $1 million.

I appreciate our pension system hardly makes life easy - everything is so expensive. But the ability to own a home up to any value, plus another $1 million in assets, is very generous.

Please do note that if you had a mortgage and put the $95,000 into that, it is part of your home and therefore not subject to the income or assets tests.

Also, while I get really cranky when I hear about people deliberately wasting money to keep their pension (this is just nuts!), if you had essential expenses, such as home maintenance, the spent amount is not tested.

Depending on your overall financial position if, for example, you felt a holiday would be really good for you both, again the spent amount is not counted under pension tests.

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Paul Clitheroe AM is Money's founder and editorial adviser. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of Ecstra, an independent charitable foundation building financial wellbeing of Australians. He is chairman of InvestSMART Financial Services, and was chair of the Australian Government Financial Literacy Board and Financial Literacy Australia from 2004 to 2019. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Comments
ZigZag Wanderer
June 19, 2024 5.07pm

Once again I note that the deeming rules have been ignored in this article. The amount of income for the income test in this instance has nothing to do with the amount earned, but the amount Centrelink 'deem' you could earn.

So if you earned 2%, centrelink would still deem that you earned 4.5%(that has been halved for covid, but WILL revert). In fact, you can be making a loss and still be deemed to make 4.5%. I know, it happened to me.

Oh, and the $451,000 in assests may not exceed the asset test, but 9ver $100k for a couple is deemed as earning 4.5% (once covid halving is reverted). That's $300 a week, which would definitely affect your pension.

Look up deeming on the centrelink website, and ignore the nicely halved current rate of 2.25%. It's going back to 4.5%.

I'm disappointed in this advice. Again.

Mike Richards
June 23, 2024 4.14pm

Inheriting 95k and you're worried about losing your pension (until such point you requalify for it). Just greed. Count yourself lucky you are getting any money; there's people who have nothing and would LOVE 95 grand right now. Greedy.