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 65 years and 6 months old
- Under the income and asset test limits
- An Australian resident (normally for 10 years).
What you might receive
- For singles the maximum basic rate of Age Pension is $888.30 a fortnight
- For couples it’s $669.60 (each) a fortnight each.1
What is the qualifying age?
From 1 July 2017, the qualifying age for the Age Pension increased from 65 years to 65 years and six months. The qualifying age will then 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 the 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 (eg 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 $168, you receive the maximum Age Pension under the income test. For couples, you can have fortnightly income of up to $300 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 income reaches $1,944.60, 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 $2,978.403.
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 (eg shares, managed funds, bank accounts)
- Superannuation investments (note: your super is not counted 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)
- Licenses (e.g. 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.
Your assets don’t affect your payment if they are below the assets test free area. The assets test free areas are:
- $253,750 for a single homeowner
- $380,500 for a homeowner couple
- $456,750 for a single non-homeowner
- $583,500 for a non-homeowner couple
The family home is still exempt from the assets test.
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 area4. 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.
1 All figures apply as at 28 June 2017 and are inclusive of the Pension supplement and energy supplement but don’t take into account payment rates and income and asset value cut-off points for transitional rate pensioners and couples separated due to ill health. From the Department of Human Services website: https://www.humanservices.gov.au/customer/services/centrelink/age-pension
2 From the Department of Human Services website: https://www.humanservices.gov.au/customer/services/centrelink/age-pension
3 From the Department of Human Services website: https://www.humanservices.gov.au/customer/enablers/income-test-pensions
4 From the Department of Human Services website: https://www.humanservices.gov.au/customer/enablers/changes-pension-assets-test