Many people assume that they can rely on the Age Pension when they retire. However, as part of your financial plan, it’s crucial to know if you qualify for it and how much you could receive.

The answer will depend on your own situation. You need to:

  • Be at least 66 years old
  • Have income and assets within specified limits and
  • Be an Australian resident (normally for 10 years)

What you might receive

  • For singles, the maximum basic rate of Age Pension is $850.40 a fortnight
  • For couples it’s $641.00 (each) a fortnight

These rates are current for the period 20 September 2019 – 19 March 2020.

What is the qualifying age?

From 1 July 2019, the qualifying age for the Age Pension increased from 65 ½ years to 66 years. The qualifying age will increase by six months every two years, reaching 67 years by 1 July 2023. You can get more information at the Department of Human Services website.

How do income and assets tests work?

The Age Pension is subject to means testing, which involves both an income and an assets test. The lower of the two results will determine how much of the maximum Age Pension amount you’re entitled to receive.

The income test

There are different forms of income that Centrelink will assess for Age Pension purposes, including:

  • Gross employment income, such as your wage or salary, including bonuses
  • Deemed income from financial investments (for example shares, managed funds, bank accounts), which means Centrelink will deem these investments to earn a certain rate of income for income test purposes and ignore the actual income generated
  • Deemed income from superannuation (if you have reached Age Pension age)
  • Distributions or dividends (and sometimes certain other attributable income) from private trusts and private companies
  • Income from outside Australia
  • Gross business income less allowable deductions
  • Part or all of pension and annuity payments, although if you commence an account based pension through your super this will generally be deemed as a financial investment
  • Net rental income

What are the income cut-off points?

  • If you’re single and your fortnightly income is below $174, you receive the maximum Age Pension under the income test. For couples, you can have fortnightly income of up to $308 and still receive the maximum Age Pension under the income test
  • For every $1 of income that exceeds these thresholds, your fortnightly Age Pension reduces by 50 cents (single or couple combined)
  • If you’re single and your fortnightly income reaches $2,040.80, you won’t be eligible to receive the Age Pension. For couples, the cut-off point where you won’t be able to receive the Age Pension is a combined fortnightly income of $3,122.00.

These rates are current for the period 20 September 2019 – 19 March 2020.

The assets test

Most property and items you or your partner own are included in the assets test. Their value is determined by how much you would receive for them if they were sold at market value (generally reduced by any debt secured against that asset). Your principal home is not counted as an asset.

Assessable assets normally include:

  • Real estate assets such as a house, unit, holiday home or vacant land
  • Retirement village entry contributions (depending on the amount)
  • Financial investments (for example shares, managed funds, bank accounts)
  • Superannuation investments (note: your super is not included as an asset while you are under the Age Pension age)
  • Most income streams (including super income streams)
  • Business assets
  • Motor vehicles, boats and caravans
  • Household contents
  • Funeral investments (depending on the value)
  • Assets or money gifted to someone else (depending on the value and time of gifting)
  • Licences (for example fishing or taxi)
  • Collections for trading, investment or hobby purposes
  • Surrender value of life insurance policies, which is the amount the insurance company will pay if you decide to cancel the policy

Assets limits

Your assets don’t affect your payment if they are below the assets test free area. The assets test free areas as at 20 September 2019 are:

  • $263,250 for a single homeowner
  • $394,500 for a homeowner couple
  • $473,750 for a single non-homeowner
  • $605,000 for a non-homeowner couple

The family home is exempt from the assets test.

Read more about the assets test limits.

How assets over the limit will affect your payment

Your Age Pension reduces by $3 per fortnight for every $1,000 of assets you own over the asset free area. This is called the taper rate.

What should my residency status be for me to qualify?

Generally to qualify for the Age Pension, you need to be an Australian resident on the day you lodge your claim and in Australia on the day you lodge your claim.

You also generally need to have been an Australian resident for a period of at least 10 years (either continuously or over smaller periods of time totalling 10 years with one of those periods being at least five years). There are some exceptions to these residency rules. You can find out more about residency requirements for the Age Pension  on the Department of Human Services website.

Keep in mind

Your eligibility for the Age Pension may be impacted by how you access your super – whether as a lump sum or via an income stream.

All figures apply as at 20 September 2019 and are from the Department of Human Services website.

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Things you should know

This article contains general advice only. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial planner before making any financial decision based on this information. This document has been prepared by Commonwealth Financial Planning Limited ABN 65 003 900 169, AFSL 231139, (Commonwealth Financial Planning) a wholly-owned, but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. Commonwealth Financial Planners are representatives of Commonwealth Financial Planning. Information in this article is based on current regulatory requirements and laws. While care has been taken in the preparation of this document, no liability is accepted by Commonwealth Financial Planning, Commonwealth Financial Planning related entities, agents and employees for any loss arising from reliance on this document. Commonwealth Financial Planning is registered with the Tax Practitioners Board as a Registered Tax (Financial) Adviser. However your Financial Planner is not a Registered Tax Agent. Consequently, tax considerations are general in nature and do not include an assessment of your overall tax position. You should seek tax advice from a Registered Tax Agent.