If you are a retiree in Australia, there is a range of government financial help available if you meet eligibility requirements. Contrary to popular belief, there is no ‘official’ retirement age in Australia. You can retire at any age you like, provided you can afford it. You can also work for as long as you like, provided you’re physically and/or mentally capable and you have a job.
However, there are specific ages when you become eligible to access a range of government financial benefits in retirement. You can read part 1 of this series here, in part 2 I will take a look at the following financial benefits, their specific eligibility requirements, and how you can claim them.
• the Medicare Safety Net
• the Pension Loans Scheme
• rent assistance
• the Seniors and Pensioners Tax Offset (SAPTO)
• dividend imputation credits
• tax-free super
• reduced minimum super pension drawdown requirements.
11. Medicare Safety Net
If you have a partner and you have out-of-pocket medical costs for out-of-hospital services, make sure you register as a couple for the Medicare Safety Net. Medicare Safety Nets have thresholds. When you spend certain amounts in gap and out of pocket costs, you’ll reach the thresholds. Once you’ve reached the thresholds, you’ll start getting higher Medicare benefits. This means you’ll get more money back from us for certain Medicare services. If your out-of-pocket medical costs for out-of-pocket hospital services exceeds this threshold in a calendar year, you’ll receive an enhanced Medicare rebate from the government13.
2020 Medicare Safety Nets Thresholds (the government calculates the Safety Nets each calendar year, 1 January to 31 December.
| Thresholds | Threshold amount | Who it’s for | What counts towards the threshold | What benefit you’ll get back |
| Original Medicare Safety Net (OMSN) | $477.90 | Everyone in Medicare | Your gap amount for the calendar year. | 100% of the schedule fee for out of hospital services. |
| Extended Medicare Safety Net (EMSN)- General | $2169.20 | Everyone in Medicare | Your out of pocket amount for the calendar year. | 80% of out of pocket costs or the EMSN benefit caps for out of hospital services. |
| Extended Medicare Safety Net (EMSN) – Concessional and Family Tax Benefit Part A | $692.20 | Concession cardholders and families eligible for Family Tax Benefit Part A | Your out of pocket amount for the calendar year. | 80% of out of pocket costs or the EMSN benefits caps for out of hospital services. |
Definitions on Medicare safety nets can be found at the link in the footnote14.
Registering as a couple enables you to combine your medical costs and reach the Medicare Safety Net threshold sooner. You and your partner will be eligible to register as a couple provided you each have either a Pensioner Concession Card or a Commonwealth Seniors Health Card.
12. Pension Loans Scheme
The Pension Loans Scheme enables retirees to get a voluntary, non-taxable, fortnightly government loan.15 These loan payments can supplement your retirement income.
To be eligible for the Pension Loans Scheme, you (or your partner) need to meet four requirements:
• You or your partner are age pension age.
• Get or are able to get a qualifying pension.
• ownership of real estate that you can use as security for the loan.
• you must have appropriate insurance cover for the real estate that you’re offering as loan security.
• you and your partner must not be bankrupt or subject to a personal insolvency agreement.
The amount you can get under the Pension Loan Scheme depends on your age and how much equity you have in your home. You can choose the amount of loan you get each fortnight. This amount can be up to 1.5 times the maximum payment rate of your eligible pension each fortnight. The government currently charge an annual interest rate of 4.5% that compounds fortnightly on the outstanding loan balance. The longer you take to repay the loan, the more interest you pay.
You can apply for the Pension Loans Scheme through Centrelink via your myGov account.16
13. Rent Assistance
Federal government rent assistance is available to senior Australians. To be eligible for rent assistance, you need to meet two requirements:17
• you must be receiving certain government payments which are listed below:
o Age Pension, Carer Payment or Disability Support Pension
o ABSTUDY Living Allowance, Austudy or Youth Allowance
o Bereavement Allowance or Widow Allowance
o Partner Allowance, Special Benefit or Sickness Allowance
o Family Tax Benefit – Part A at more than the base rate
o Parenting Payment partnered and single
o JobSeeker Payment or Farm Household Allowance.
• you must be paying rent, fees in a retirement village, board, lodging, or site fees (e.g. if you live in a caravan park).
The amount of rent assistance you will receive will depend on your individual circumstances.
You don’t need to apply for rent assistance. Your eligibility will be assessed when you apply for a government payment (e.g. the age pension).
Who can’t get it?
You won’t get Rent Assistance if:
• you’re leasing from a state or territory housing authority
• you own or are buying the home you live in, except relocatable homes
• you’re travelling away from the home you own for less than 12 months
• the Australian Government pays a subsidy to the approved residential aged care facility where you live
• your partner gets Rent Assistance with Family Tax Benefit
• you get an allowance and your partner gets Rent Assistance with their pension.
14. Seniors and Pensioners Tax Offset (SAPTO)
A tax offset reduces the amount of any tax you may have to pay (if you do need to pay any tax in your retirement). It’s important to understand that offsets only reduce the amount of tax you may need to pay, they don’t generate refunds. The best they can do is reduce your tax liability to zero.
To be eligible for the Seniors and Pensioners Tax Offset, you need to meet two requirements18:
• you must be receiving an Australian government pension or allowance (e.g. the age pension).
• you (and or partner if you have one) must satisfy the SAPTO income thresholds19.
The amount of offset you’re entitled to will depend on your individual situation. You don’t need to apply for the SAPTO. Your eligibility will be determined by the Australian Taxation Office when you lodge your tax return. The offset will then be applied to reduce any tax you owe.
15. Dividend imputation credits
If you invest in Australian shares, Australia’s dividend imputation system can allow you to reduce the amount of tax you may need to pay or to get a tax refund. Under this system, you receive what is called a ‘franking credit’ for the company tax already paid on any share dividends you may receive. These credits can be used to offset you tax bill. If they exceed your tax bill, you will receive the remainder as a refund. If you have no tax bill at all, you can receive your franking credits as a tax refund.
16. Tax-free super
To reduce the tax rate to 0% in superannuation, you will have to turn your superannuation account from accumulation to pension mode. To be able to switch your super to pension mode, you will have to satisfy a condition of release and this will be subject to the transfer balance cap20. These conditions are:
• reach your preservation age and retire21
• reach your preservation age and choose to begin a transition to retirement income stream while you are still working
• are 65 years old (even if you have not retired).
Once you have met a condition of release, you can switch your super account to pension and the super tax rate in pension mode will be 0%.
17. Reduced minimum super pension drawdown requirements
One of the federal government’s responses to the economic impact caused by the coronavirus (COVID-19) pandemic has been to reduce the minimum superannuation drawdown requirements for retirees with account-based pensions by 50% until the end of the 2020-21 financial year. 22 This reduces the pressure on retirees to sell investment assets when their value may have dropped.
The revised drawdown rates are below.
• retirees aged under 65: 2% (previously 4%).
• retirees aged from 65 to 74: 2.5% (previously 5%).
• retirees aged from 74 to 79: 3% (previously 6%).
• retirees aged from 80 to 84: 3.5% (previously 7%).
• retirees aged from 85 to 89: 4.5% (previously 9%).
• retirees aged from 90 to 94: 5.5% (previously 11%).
• retirees aged over 95: 7% (previously 14%).
The bottom line
As you can see, there are a variety of government benefits that you can potentially access in retirement. It’s important to be aware of them and to claim all your entitlements.
13 https://www.servicesaustralia.gov.au/individuals/services/medicare/medicare-safety-nets
14 https://www.servicesaustralia.gov.au/individuals/services/medicare/medicare-safety-nets/how-they-work
15 https://www.servicesaustralia.gov.au/individuals/services/centrelink/pension-loans-scheme
16 https://www.servicesaustralia.gov.au/individuals/services/centrelink/pension-loans-scheme/how-apply
17 https://www.servicesaustralia.gov.au/individuals/services/centrelink/rent-assistance/who-can-get-it
18 https://www.ato.gov.au/Individuals/Income-and-deductions/Offsets-and-rebates/Seniors-and-pensioners-tax-offset/#Income
19 https://www.ato.gov.au/Individuals/Income-and-deductions/Offsets-and-rebates/Seniors-and-pensioners-tax-offset/#Income
20 https://www.ato.gov.au/Individuals/Super/Withdrawing-and-using-your-super/Transfer-balance-cap/
21 https://www.ato.gov.au/individuals/super/in-detail/withdrawing-and-using-your-super/withdrawing-your-super-and-paying-tax/?anchor=Whenyoucanaccessyoursuper#Preservationage
22 https://treasury.gov.au/coronavirus/households/retirees
