Written by:
Joel Simmonds
Head of Advice
If you’re planning for retirement or already enjoying it, the age pension can be a lifeline to help cover your living expenses. But understanding how Centrelink calculates your payments can be a bit like navigating a maze.
The two key tests that determine your eligibility — the assets test and the income test — are worth getting to know, because their outcome will determine how much pension you’re entitled to receive. So, let’s break them down in a way that makes sense!
The age pension assets test is basically Centrelink’s way of checking out what you own and determining how it might impact your pension payments.
It’s not just about cash in the bank; it includes everything from investment properties to your car, shares, and even collectibles. But don’t worry—your family home isn’t included.
Here’s the deal: if you’ve got assets beyond a certain threshold, your pension payments can be reduced. The more you own (excluding your main residence), the less you might receive.
As of 2024, the assets test limits vary depending on your living situation and whether you are single or part of a couple. Here’s a summary:
For a part pension, the asset limits are a bit higher:
If your assets are above these limits, you’ll see a reduction in your pension payments. Keep an eye on those numbers to avoid surprises!
The value of your assets is assessed to determine how much pension you can receive.
If your assets exceed these limits for the part pension, you may no longer be eligible for age pension payments.
Now, let’s chat about the income test. This test looks at any money you’ve got coming in regularly — think earnings, investment returns, or even rental income. Centrelink uses this to decide how much pension you’re eligible for.
Centrelink adds up your regular income and if you earn above a certain amount, your pension payment gets trimmed.
Here’s a quick summary of where the cut-offs stand:
Exceed these limits, and your pension gets adjusted. So, managing your income is just as crucial as managing your assets.
Centrelink looks at both the income and assets test and uses whichever results in a lower pension payment. It’s their way of balancing things out, but it means you’ll need to keep both tests in mind when managing your finances.
Life happens, and big events can throw a wrench into your pension plans. Here’s a look at how certain scenarios might affect your payments and what you can do about it.
Thinking about downsizing or relocating? Here’s what you need to know:
Once you hit pension age, your super balance counts toward the age pension assets test. Plus, any income you draw from it is part of the income test.
Yes, it’s possible — but it can be a bit tricky. Lenders will look at your age pension as part of your income, and they’ll want to be sure you can make the repayments.
If you’re selling up and moving somewhere smaller, you might end up with extra funds. But those could be counted under the assets test.
Understanding your potential pension entitlement can be made easier with online tools like the age pension assets test calculator. These calculators allow you to input your assets and provide an estimate of your pension payments.
One common question is how superannuation is treated under the assets test. Your superannuation balance becomes assessable once you reach age pension age, meaning it can affect your pension payments.
Navigating the age pension system can be complex, especially when specific life events or circumstances come into play. Here are some situations that could impact your age pension entitlements and what you need to be aware of:
Selling your home can impact your pension entitlements, as the proceeds are considered an asset under the age pension assets test. If you plan to downsize and have leftover funds from the sale, these surplus amounts might reduce your payments.
Once you reach age pension age, your superannuation is treated as an asset. This includes both lump sums and income streams, and it can impact your age pension eligibility under the assets test.
It’s possible for aged pensioners to secure a home loan, but there are additional challenges to consider. Lenders will assess your age pension income and other financial assets to determine your ability to repay the loan.
If you decide to downsize, any leftover funds from selling your home could affect your pension entitlements. These funds are typically counted under the pension asset test unless reinvested into a new primary residence promptly.
Understanding the age pension assets test is crucial for maximising your pension entitlements.
By knowing how your assets are assessed and what exemptions may apply, you can plan your retirement more effectively. Whether it’s managing superannuation, understanding the implications of selling your home, or seeking advice on complex situations, a well-informed approach can help you make the most of your pension benefits.
If you’re unsure about your situation or need personalised guidance, consulting with a financial advisor can provide clarity and help you optimise your assets for a more secure retirement.
Planning for retirement is one of the most important financial decisions you’ll make. In this video, Erin walks you through our retirement planning services, explaining how we help you achieve your retirement goals.
Here’s some of the most commonly asked questions about the aged pension assets test.
If your question isn’t answered below, please feel free to get in touch. We’re always happy to help.
The Seniors Pensioners Tax Offset (SAPTO) can help eligible senior Australians reduce their tax liability, potentially making them pay less tax or even none at all.
It’s especially useful for pensioners who receive the age pension, as it considers income from investments, pensions, and other sources.
This can be an important factor when calculating your overall retirement income alongside the income test.
The Centrelink age pension asset test assesses the total value of your assets to determine your eligibility for pension payments.
If your assets exceed the asset test threshold, your pension payments may be reduced or stopped altogether.
The test is used alongside the income test to ensure that pension support is provided to those who need it most.
The asset threshold refers to the maximum value of assets you can have while still being eligible for a full or part pension.
This threshold varies depending on factors like whether you are a single homeowner, a non-homeowner, or part of a couple.
Centrelink regularly updates these thresholds, so it’s a good idea to check the most recent information.
Yes, aged pensioners can apply for a home loan in Australia, but it may be more challenging due to age and income considerations.
Lenders will look at your age pension, any other income, and your overall ability to repay the loan.
It’s best to speak with a financial advisor who understands the specific challenges and can help you navigate this process.
Certain assets are exempt from the age pension asset test. For example, your primary residence (your home) is not counted as an asset. Some types of prepaid funeral plans and specific types of annuities may also be exempt.
Understanding which assets are included or excluded can help you better plan for your retirement and maximise your age pension entitlements.
If your assets exceed a certain limit, you may lose your eligibility for the age pension or see your payments reduced. This limit varies depending on whether you are single or part of a couple, and whether you own a home or not. It’s crucial to keep track of your asset value to ensure you remain eligible.
Centrelink combines the results of the income test and the asset test to determine your pension payment rate. Whichever test results in a lower pension payment is the one that will be applied.
This means it’s important to understand both how your income from investments affects your pension and how your assets are valued under the assets test.
To qualify for the full age pension, your assets must fall below specific thresholds, which differ for single homeowners, non-homeowners, and couples.
If your assets are above these limits, you may still receive a part pension, depending on how far above the threshold you are.
Please see the figures above for guidance.
Yes, once you reach age pension age, superannuation is considered an assessable asset under the age pension assets test. The value of your super balance can impact your age pension payments, particularly if you have significant super savings. It’s important to factor this into your retirement planning to ensure you maximise your pension benefits.
When you sell your home, the proceeds may be counted as an asset if not reinvested into a new home within a specific timeframe. The funds from the sale are exempt for up to 12 months while you find a new residence, but any leftover funds may impact your pension entitlements under the asset test once that period is over.
The asset threshold for receiving a full pension varies based on whether you are a homeowner or non-homeowner, single or part of a couple.
For example, single homeowners typically have a lower threshold than non-homeowners due to the value of their primary residence being excluded. Exceeding the asset threshold means you may only qualify for a part pension or none at all.
The income test looks at money you earn from sources like investments, rental properties, and part-time work. This test affects your pension payments if your income exceeds certain thresholds. For every $1 you earn over the threshold, your pension payment is reduced by a specific amount per fortnight, impacting the final payment you receive.
Read More
Thinking about downsizing as you head into retirement? You’re not alone. Many Australians choose to downsize their homes to make the most of their savings and enjoy a simpler lifestyle. But what does downsizing really mean, and how can it impact your financial situation?
Thinking about downsizing as you head into retirement? You’re not alone. Many Australians choose to downsize their homes to make the most of their savings and enjoy a simpler lifestyle. But what does downsizing really mean, and how can it impact your financial situation?
If you’re planning for retirement or already enjoying it, the age pension can be a lifeline to help cover your living expenses. We cover everything you need to know to understand how your assets and income can impact your pension payments.
Learn about unit trusts in Australia, their benefits, structure, and key differences from other trusts. Get expert insights on setting up and managing unit trusts effectively.
What exactly is a discretionary trust, and how does it work? Whether you’re considering setting one up for the first time or just want to understand its advantages, it’s important to know how these trusts operate and the potential tax benefits they offer.
If you’re thinking about setting up a family trust, you’re probably looking for a way to protect your family’s assets and ensure they’re passed down smoothly to the next generation. It’s a big decision, and getting it right can make all the difference to your financial future.
This is a publication of Direct Wealth Pty Ltd, a wholly owned subsidiary of Direct Wealth Group Pty Ltd.
General Advice Warning – The information contained in this article is of a general nature and does not take into account your particular objectives, financial situation or needs. You should therefore consider the appropriateness of the advice for your situation before acting on it. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decisions regarding any products or strategies mentioned in this publication.
Disclaimer – While all care has been taken in the preparation of this blog, to the maximum extent permitted by law, no warranty is given in respect of the information provided and accordingly, neither Direct Wealth nor its related bodies corporate, employees or agents shall be liable for any loss suffered arising from reliance on this information.
