The Age Pension income test means that people don’t have to be retired or have no income to apply for a pension. You can apply for a pension while still receiving income from employment or self-employment.
When Centrelink assesses wages, it is looking for your gross income. If you are running a business, however, we are looking at your net profit – that’s your income less allowable expenses.
Services Australia may consider allowable expenses differently to the Australian Taxation Office when it assesses your income. Find the list of deductions Services Australia allows here.
If you’ve been self-employed for a while, your tax returns may include all the information Services Australia needs to assess your income. If you’re a sole trader, your business income is recorded in your personal tax return. In a partnership, the business has its own tax return.
If you’re thinking of starting a business while getting a payment, it’s a bit more complex. Your last tax return won’t help as you weren’t running your business then, and due to the nature of business, reporting to Centrelink every fortnight might not reflect all your costs and income as some are monthly, annually, or ad hoc as the year goes by.
Starting a business
If you’re starting a business as a sole trader or partnership, you’ll need to provide a profit and loss statement estimating what you realistically think you’ll earn in the first 13 weeks.
A profit and loss statement is a list of your income and allowable expenses. If income is more than expenses, you have a profit. If expenses exceed income, you have a loss. If you have a loss, your assessable business income for Services Australia will be $0.
After the first 13 weeks, you need to provide a profit and loss statement showing your actual income and costs. You need to do that again at six months, nine months, and a year. Once you have a full year of income and expenses on your personal or business tax return, we can base your assessable income off that. After that, you’ll continue to lodge your tax returns and we’ll see you in 12 months.
Should your income change throughout the year, such as from increasing or decreasing your work hours, you can provide a profit and loss statement to give details of your current business income.
Do you work and still receive the Age Pension? Why not share your experience in the comments section below?
Also read: What are the new Work Bonus rules and how do they apply?
