220.127.116.11 Historical Conversion from Means Test to Income Test - 25 November 1976
This topic contains short explanations of the:
- differences between the means test and the income test, and
- effects on a pension of a decrease in income under the income test.
Act reference: SSAct section 8(1)-'income'
Difference between means test & income test
Income was common to both the income test and the means test. The difference between the 2 tests was that income from property was used in the income test, in lieu of the value of the property. Therefore, if the income from the property was less than the property value, a person received an increase in pension on the conversion from the means test to the income test.
To avoid people being disadvantaged by the introduction of the income test, the legislation included a savings provision for:
- basic pension,
- RA, and
- fringe benefit eligibility, including funeral benefit (see explanation).
Explanation: The amount of pension, RA and any fringe benefits, such as funeral benefits, being paid to a person who was in receipt of pension on 25 November 1976 was not reduced solely because of the change in the legislation.
Any difference between the rates payable under the means test and the income test was 'saved'. The person did not receive any increase in pension until the rate under the means test fell below the rate payable under the income test.
Explanation: Any increase in a person's income after 25 November 1976 reduced the pension, including RA, but did not affect the amount 'saved' even though this amount was allowed for in the assessment. In these cases the reduced rate became the new ceiling beyond which pension could not be increased unless the person became entitled to a higher rate under the income test.
Effects on a pension of a decrease in income
Decreases in the person's total income after 25 November 1976 reduced the amount saved by the amount of the decrease in income, but no increase in the pension could be paid until the amount saved had been reduced to zero.
The 'savings' provision ceased to apply upon the death of a partner, separation, marriage or remarriage.
Example 1: If the rate of pension under the means test was $30.00 per fortnight (pf) and the rate would have been reduced to $25.00 pf under the income test, $5.00 was saved. When, under a later Amending Act, a general increase of $3.00 pf became payable, the rate remained at $30.00 pf and the saved amount was reduced to $2.00 pf.
Example 2: If the rate of pension under the means test was $30.00 pf and the rate would have been reduced to $28.00 pf under the income test, $2.00 was saved. When, under a later Amending Act, a general increase of $3.00 pf became payable, the rate payable became $31.00 pf (i.e. $28.00 + $3.00) and the saved amount was reduced to zero