How does the reduction to JobKeeper affect couples?
By William Truong, Technical Services Manager
This year, due to COVID-19, Australians are confronted with many challenges and many have had to rely on financial assistance from the Government. Two of the most important temporary measures are the JobKeeper and JobSeeker Payments.
The Government has recently outlined that from late September 2020, both the JobKeeper and JobSeeker Payments are proposed to be extended but with some reductions in the amounts payable. We recently discussed these proposals in this Tech Alert.
In this article, we focus on an important question, namely, if your clients are faced with a likely reduction, or a loss to their JobKeeper Payment, from late September 2020, can they also receive the JobSeeker Payment, if so, how would this impact their partner?
Changes to the JobKeeper Payment may make recipients of it eligible for the JobSeeker Payment.
The Government media release indicated the following:
- The income free area for JobSeeker Payment recipients will increase from $106 per fortnight to $300 per fortnight. This means recipients may receive income up to $300 per fortnight without any reduction in their JobSeeker Payment under the income test.
- Every dollar received over $300 per fortnight will reduce their JobSeeker Payment by 60 cents under the income test. Currently, the JobSeeker Payment is reduced by 50 cents for every dollar received between $106 and $250 per fortnight and by 60 cents thereafter.
- This income test is applied to the JobSeeker Payment only. If a client is eligible for at least a part JobSeeker Payment they will receive the full Coronavirus Supplement (reduced from $550 per fortnight to $250 per fortnight from 25 September to 31 December 2020).
- From 25 September 2020 to 31 December 2020, the JobSeeker Payment partner income test will increase from 25 cents to 27 cents for every dollar of partner income earned over the partner income free area of $1,165 per fortnight
Clients receiving the JobSeeker Payment, must remember they have a cut-off asset test. Entitlements do not ‘phase out’ as they do for those receiving the Age Pension. Clients who are a dollar under the threshold may be entitled to the full JobSeeker Payment. Clients with assets at or above the threshold will not be entitled to any JobSeeker Payment.
Eligibility for the JobSeeker Payment ceases above the following limits:
|Singles (homeowner)||Couples (homeowner)|
|Asset test cut-off limits||$268,000||$401,000|
Naturally, your client’s entitlements will be based on both asset and income testing, however, for the purpose of this article, we will focus on how they will be affected by the income test.
The first five case studies are applicable to allowee couples and the last case study focuses on an allowee/pensioner couple.
As a general rule for allowee couples, when both partners are eligible for an allowance, each partner’s income test is calculated individually. When an individual’s income reduces their own payment to nil because their income is in excess of a certain limit, currently $1,165 per fortnight (pf), the income above $1,165 pf will then reduce their partner’s fortnightly payment by 27 cents for each excess $1.
In the scenarios below, if clients are eligible for any level of JobSeeker Payment, they will also receive the full Coronavirus Supplement of $250 pf.
1) If both partners are receiving JobKeeper Payments of $1,200 each, then neither would be entitled to the JobSeeker payment as they will exceed the maximum income limit for couples, which is $1,165 from late September 2020.
2) If Partner one, Warren, is receiving the JobKeeper Payment of $1,200 pf, and Partner two, Lauren, is receiving a JobSeeker Payment, then Warren’s JobKeeper Payment would reduce Lauren’s JobSeeker entitlement by $10 pf.
($1,200 pf - $1,165 pf) x 27 cents = $10 pf reduction to Lauren’s JobSeeker Payment.
Lauren’s JobSeeker Payment, including the energy supplement = $509 pf ($519 pf – 10 pf).
Reduction = ($750 - $300) x 60 cents = $270
4) When Lauren is receiving the $750 pf JobKeeper Payment and $248 pf of the JobSeeker Payment, then Warren can earn up to $2,086 pf. This assumes Warren is not receiving any pension income, including his JobKeeper Payment before Lauren’s JobSeeker Payment is reduced to nil.
Reduction: ($2,086 – $1,165) x 0.27 cents reduction of Lauren’s income = $248 pf.
5) If Lauren is receiving the JobKeeper Payment of $750 pf and JobSeeker payments of $248 pf and if Warren is receiving the JobKeeper payment of $1,200 pf, assuming Warren is not a pensioner, then Warren will not be entitled to the JobSeeker Payment and his income also reduces Lauren’s JobSeeker Payment.
As each partner is calculated based on their own income test: $1,200 - $1,165 (max income limit) = no entitlement to the JobSeeker Payment for Warren.
However, Warren’s JobKeeper Payment also reduces Lauren’s JobSeeker Payment by $9.45 pf. Calculated as: ($1,200 pf - $1,165 pf) x 0.27.
Lauren’s JobSeeker Payment is $238 pf. Calculated as: $248 pf – $9.45 pf.
The below table summarises the scenarios outlined above as it estimates the level of JobSeeker Payments for couple clients who may be faced with losing or receiving a reduced JobKeeper Payment under the income test. It is also assumed that the couple has no Age Pension income or any other income.
In the scenarios below, if clients are eligible for any level of JobSeeker Payment they will also both receive the full Coronavirus Supplement of $250 pf in addition to the figures shown in the table.
Relevant for the period 25 Sept 2020 to 31 Dec 2020:
|How much |
more can P2
earn (pf) before P1 is
|$519 for P1|
$519 for P1
|$509 for P1||$3,050|
|$519 for P2||$248 for P2||Nil for P2|
|$248 for P1||$519 for P2||$2,086|
|$248 for P1||$2,086|
|$238 for P1||$2,046|
|$248 for P2||Nil for P2|
|Nil for P1|
$509 for P2
|Nil for P1||Nil for P1||Nil for P2|
$238 for P2
Eligible Allowee/ pensioner couple
6) Warren is receiving the Age Pension and the JobKeeper Payment. While Lauren is receiving only the JobSeeker Payment. So, how does this affect their entitlements?
If Warren has been receiving the Age Pension and the JobKeeper Payment of $1,500 pf, when their JobKeeper Payment is reduced from late September 2020 to $1,200 pf or $750 pf, they may likely receive a higher Age Pension as a result. Please note, for those on the Age Pension, their JobKeeper Payment may be reduced by $300 pf under the Work Bonus provisions via their income test. This may entitle them to a higher Age Pension.
In addition, Warren’s lower JobKeeper Payment would reduce the couple’s combined income for Centrelink purposes. This improves the income assessment for Lauren’s JobSeeker Payment, who is assessed on half of their combined incomes.
If Warren receives $1,500 pf from the JobKeeper Payment, their Age Pension may be calculated under the income test as follows:
Assessable income: $1,500 pf - $300 pf work bonus = $1,200 pf
Pension under the income test = $1,423 pf couple’s maximum pension – [($1,200 pf - $316 pf couple’s income free limit) x 0.5] = $981 pf combined rate or $490 pf for Warren.
If Warren’s JobKeeper Payment reduces to $1,200 pf, his Age Pension may be increased to $565 pf, which is an approximate increase of $75 pf .
In addition, Warren’s lower JobKeeper Payment will reduce the couple’s combined income for Centrelink purposes.
Lauren, who receives the JobSeeker Payment, would be income tested on half of the combined income of the couple (as outlined in the scenarios above). Lauren would be income tested on only $450 pf ($1,200 pf - $300 pf work bonus)/2 and not on $600 pf, assuming the JobKeeper Payment is $1,500 pf.
These calculations assume the couple do not have any other sources of income and uses rates/thresholds available as at August 2020.
Strategy tip: Don’t delay apply early!
Services Australia will allow recipients of the JobKeeper Payment to apply for income support ahead of the cessation of their JobKeeper Payment to ensure people can quickly access income support after their access to the JobKeeper Payment ends.
The income test for the JobSeeker Payment can be complex, particularly when dealing with couples. With many clients becoming eligible for the JobSeeker Payment understanding how the JobSeeker Payment is means tested may become increasingly important.
If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.
The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.