Pension Affected by Renting Out Rooms

As a pensioner, if we call the rent I receive “income” then according to Dept Human Services

“If fortnightly income is over $172, pension reduced by 50 cents for each dollar earned over $172”. Fine I can do that arithmetic and will perform an example calculation at the bottom of this post.

Firstly note on a DSS page under “Income treatment of boarding/lodging situations”…

The following table shows the percentage of income from different kinds of boarding/lodging situations that is treated as income for social security purposes.

Note that normal renting gets no concessions. Only having “lodgers” gets a concession.

So if my lodger gets breakfast each day (even if it is simply white bread toast, butter, jam, tea and instant coffee) only half the rent they pay is assesable. eg if they pay $400 rent per fortnight then only $200 counts as income, the first $172 of which does not affect my pension and I lose half of the remaining $28 (via reduced pension) so in effect I am getting $200+$172+$14=$386 rent per fortnight

Not bad but I also have to pay tax on $200/fortnight.

If I have two lodgers (paying total of $800 incoming per fortnight) then only $400 counts as income, the first $172 of which does not affect my pension and I lose half of the remaining $329 so in effect I am getting $400+$172+$164.5=$736.50 rent per fortnight… plus tax on $400 per fortnight.

And if I didn’t know about the breakfast concession it would be worse. In the second example $560 counts as income, the first $172 of which does not affect my pension and I lose half of the remaining $388 so in effect I am getting $240+$172+$194=$606 rent per fortnight… plus tax on $560 per fortnight.

I don’t know if the lodger concessions apply just to Centrelink or also taxation. If the ATO considers the entire amount taxable ($10,400 per year) then the single room at $200/week attracts very little tax since the pension is about $23k so I am only just above the tax free threshold. Charging more or renting a second room would attract 32% tax. According to Fairfax press that is…

“If you are a single person and are eligible for the senior Australian tax offset, you can earn $30,684 a year and pay no tax. This includes income from all sources, including the age pension. A pensioner can earn $6500 a year from employment – this money is not taken into account when assessing their eligibility under the income test.”