• Centrelink Age Pension assets test

  • The Centrelink Age Pension assets test works by reducing your Age Pension payment for every dollar of assets you own over a certain value. The test takes into account most assets, including any property (except your primary home) or possessions owned, or partly owned, in or outside Australia.

    The assets test is one of two means tests used by Centrelink to determine your Age Pension eligibility, the second being an income test. The test that produces the lowest Age Pension payment, or zero, is then applied.

    Changes to the assets test from 1 January 2017

    The changes to the Centrelink assets test from 1 January 2017 may affect your Age Pension payment. These changes included an increase to the assets test thresholds and the assets test taper rate.

    The presentation below outlines how the assets test previously worked and explains the 1 January 2017 rules. The presentation provides examples of how different asset types and values can affect your Age Pension payment and compares situations under both sets of rules.

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  • Assets test threshold and taper rate

    The assets test threshold, or disqualifying limit, is the maximum value of assets you can have before they affect your Age Pension payment. The assets test thresholds increased under the 1 January 2017 changes, potentially allowing more part pensioners to qualify for the full Age Pension payment.

    The below table outlines the assets test thresholds, or disqualifying limits, for the full Age Pension payment:

     
    2016 rules 2017 rules
    Single homeowners full pension assets must be less than $209,000 $250,000
    Single non-homeowners full pension assets must be less than $360,500 $450,000
    Couple homeowners full pension assets must be less than $296,500 $375,000
    Couple non-homeowners full pension assets must be less than $448,000 $575,000

    The table below outlines the assets test thresholds, or disqualifying limits, for the part Age Pension payment:

     
    2016 rules 2017 rules
    Single homeowners part pension assets must be less than $793,750 $542,500
    Single non-homeowners part pension assets must be less than $945,250 $742,500
    Couple homeowners part pension assets must be less than $1,178,500 $816,000
    Couple non-homeowners part pension assets must be less than $1,330,000 $1,016,000

    Maximise your pensionThese figures correct as at September 2016. Source: http://www.humanservices.gov.au/customer/enablers/assets/

    Previously, pension payments were reduced by $1.50 for every $1,000 owned over the assets threshold (excluding the family home). This is known as the Age Pension taper rate. The assets threshold changed on 1 January 2017 and pension payments are now reduced by $3 for every $1,000 owned over the threshold. This means the amount of assets a pensioner can have on top of their family home and still receive a part pension is reduced.

    The presentation above runs through an example of how a couple’s eligible pension payment is determined under the 1 January 2017 rules compared to the previous rules.

    Types of assets assessed under the Centrelink assets test

    Most of your assets will be taken into account when calculating your Centrelink Age Pension payment. The value included for your personal assets (car, home contents etc.) is what you would get for them if you sold them at market value. Generally, any debt secured against a particular asset is deducted from the value of that asset.

    Some types of assets are exempt from the assets test, irrespective of their value. These assets include your primary home and some income streams, depending on their purchase date.

    For more information on what types of assets are included or exempt from the Centrelink Age Pension assets test, visit the Department of Human Services website.

  • How will your payment be affected by the Age Pension changes?

    More than 495,000 Australians are estimated to have been impacted by the 1 January 2017 changes to the Age Pension assets test:

    • Around 170,000 people are estimated to have had an increase in their pension payment 
    • Around 326,000 people are estimated to have lost all or part of their Age Pension payment.

    Source: http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/BudgetReview201516/Pensions 

    It’s important that you understand how the changes to the Centrelink assets test have affected your Age Pension payment so you can allow for any change in your income.

    Graphs 1–4 below illustrate what your annual pension payments are likely to be under the 1 January 2017 rules compared to the previous rules. The graphs take into account whether you are:

    • a homeowner or non-homeowner,
    • single or part of a couple and
    • the amount of assessable assets you hold.

    While these graphs focus on the assets test, it’s important to remember that your eligible Age Pension payment is also dependent on the income test. The test that produces the lowest payment, or zero, is applied.

    Couple homeowners

    Couple homeowner

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    Calculations are based on Department of Human Services data. Please see end of article for relevant sources.

    No change: Homeowner couples with around $460,000 in assessable assets (excluding the family home) receive a similar Age Pension payment under both the new 2017 and the previous asset test rules

    Significantly higher payment: Homeowner couples with assessable assets close to the January 2017 full Age Pension threshold of $375,000 (excluding their family home) receive the most significant pension payment increase.

    Significantly lower pension: Homeowner couples with assessable assets close to the January 2017 part Age Pension threshold of $823,000 (excluding their family home) have the most significant pension payment reduction.

    Single homeowners

     Single homeowner

    Calculations are based on Department of Human Services data. Please see end of article for relevant sources.

    No change: Single homeowners with around $290,000 in assessable assets (excluding their home) receive a similar Age Pension payment under both the current rules and the January 2017 asset test rules

    Significantly higher payment: Single homeowners with assessable assets close to the January 2017 full Age Pension threshold of $250,000 (excluding their home) receive the most significant pension payment increase

    Significantly lower pension: Single homeowners with assessable assets close to the January 2017 part Age Pension threshold of $547,000 (excluding their home) have their pension payment reduced most significantly.

    Couple non-homeowners

    Couple non-homeowner

    No change: Non-homeowner couples with around $710,000 in assessable assets will receive a similar Age Pension payment under both the previous rules and the January 2017 asset test rules.

    Significantly higher payment: Non-homeowner couples with assessable assets close to the January 2017 full Age Pension threshold of $575,000 receive the most significant pension payment increase.

    Significantly lower pension: Non-homeowner couples with assessable assets close to the January 2017 part Age Pension threshold of $1,023,000 have their pension payment reduced most significantly.

    Single non-homeowners

    Single non-homeowner

    Calculations are based on Department of Human Services data. Please see end of article for relevant sources.

    No change: Non-homeowner singles with around $545,000 in assessable assets receive a similar Age Pension payment under both the previous rules and the 2017 asset test rules

    Significantly higher pension: Non-homeowner singles with assessable assets close to the January 2017 full Age Pension threshold of $450,000 receive the most significant pension payment increase

    Significantly lower pension: Non-homeowner singles with assessable assets close to the January 2017 part Age Pension threshold of $747,000 have their pension payment reduced most significantly.

    Pension from your super

    Your total income in retirement may comprise a part Age Pension to complement a pension from your super, as well as income from other sources.

    AIST Award winner RetireSmart pension To manage the pension from your super, consider our award-winning RetireSmart account based pension with its automated investment feature that helps manage your market risk.

    Commonwealth Seniors Health Card

    Pensioners who have lost their Age Pension entitlements as of 1 January 2017 as a result of the changes to the Centrelink Age Pension assets test are automatically issued with a Commonwealth Seniors Health Card. They are exempt from the usual income test requirements for these cards indefinitely. 

    The Commonwealth Seniors Health Card gives older Australians access to cheaper prescription medicines, Australian government funded medical services, and other government concessions.

    There may be strategies you can employ to reduce your assessable assets and maximise your Age Pension payment!

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    Need more information?

    Do you have questions about the Centrelink Age Pension or do you require specific advice on your own situation? You could benefit from meeting with a financial planner at Australian Catholic Superannuation.

    Learn more about our financial advice services or book an appointment with us today.

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    Sources:

    Payment rates based on Age Pension payment rates effective September 2016.
    Source: http://www.humanservices.gov.au/customer/enablers/assets/

    2016 thresholds correct as at September 2016. Source: http://www.humanservices.gov.au/customer/enablers/assets/

    2017 thresholds based on: The Hon Scott Morrison MP, 2015, Rebalance Assets Test Parameters - Non Homeowners Pension Impact, Media Release (related file), 7 May, Department of Human Services, Canberra.