Under the means-testing provisions of our social security system, members of a couple are each paid a partnered rate of Age Pension, and their combined income and assets are assessed regardless of which member of the couple the income or asset belongs to.
The rationale behind this (often contentious) rule is that members of a couple can pool their resources and their living costs are shared. But what happens when you are unable to do this because you must live apart?
For many couples this occurs when one of them becomes unwell and needs to move to alternative accommodation to receive care. This may be in the home of a relative or, more often than not, in an aged care setting.
When this happens, Centrelink will consider you to be an ‘Illness Separated Couple’. If moving to a care setting, Centrelink should organise this change in Age Pension status for you, but we have seen cases where it was missed so it’s a good idea to mention that you expect to receive a higher rate of Age Pension payment. There is no application process, you just need to ensure Centrelink is aware you are not living together due to illness.
Illness separated couples are still partnered; they still have a combined income and assets test, but each person receives a single rate of payment. Because the maximum rate payable is higher, the assets and income tests cut-off limits are also higher, as you can see in the tables below.
Source: Services Australia. Limits apply 20 September 2023 to 19 March 2024.
An example will help illustrate how the new rate of payment for illness separated couples is calculated.
Case study: Mike and Carol
Mike and Carol own their home where they have spent many happy years together. Mike has super with a balance of around $500,000 and Carol has about $100,000 in her super. They have a joint bank account with $50,000, a car and some household contents totalling $30,000.
The maximum rate of Age Pension for members of a couple is $826.70 each. However, with total combined assets of $680,000, they exceed the asset threshold (the point at which their payment starts to reduce) by $228,500. For every thousand dollars over the threshold, they lose $1.50 per fortnight each – a total of $342.75 each. Therefore, Mike and Carol’s Age Pension is reduced under the assets test and they receive a fortnightly Age Pension of $483.95 each.
When Carol becomes unwell and goes into aged care, they are eligible for a new rate of payment as an Illness Separated Couple. This means that the maximum rate of Age Pension is now $1,096.70 per person – equivalent to the single rate of payment. Their combined assets of $680,000 still exceeds the lower threshold by $228,500 and reduces their rate by $342.75 each (228.5 x $1.50), however it is a higher starting point as they can each be paid an illness separated rate. They would now receive a fortnightly Age Pension of $753.95 each (compared with $483.95 each before Carol moved into aged care).
To be considered illness separated, the following must apply:
- They are unable to live together in their home
- The inability to live together:
- Is due to illness or infirmity of either or both of them.
- Results in their living expenses being greater than otherwise.
- Is likely to continue indefinitely.
A person entering temporary respite care would not qualify as illness separated as they are likely to return home at the end of the temporary respite period.
When both members of the couple are in aged care, they are considered illness separated, even if they are at the same facility or even in the same room.
Note: This article is limited to the most common scenario for pensioner couples living apart – couples separated by illness. There are other situations where couples may be separated, such as partner living overseas or imprisonment, but different Age Pension rules will apply.
Karen Hunt 16 Oct 2023 – SuperGuide
In this article we have not taken into account any particular person’s objectives, financial situation or needs. You should, before acting on this information, consider the appropriateness of this information having regard to your personal objectives, financial situation or needs. We recommend you obtain financial advice specific to your situation before making any financial investment or insurance decision.
