In our last newsletter we showed how much individuals can get if they qualify for the Age Pension. So, now let’s look at how the Age Pension is affected by the Assets Test and the Income Test.
The Assets Test
Excluding the family home, a single person is allowed to own up to $253,750 in assets. After that the Pension begins to fall and cuts out completely at $556,500. For a couple, they can own up to $380,500 in assets and above that the Pension starts to fall and cuts out at $837,000.
The Income Test
This test is pretty savage. For a single person they can earn up to just $168 per fortnight ($3,848 pa) before they start losing their Pension and it cuts out completely at $1,983 per fortnight ($51,558 pa). For a couple, they can earn $300 per fortnight ($7,800 pa) and over that amount the Pension starts to fall and cuts out at $3,036 per fortnight ($78,936).
So, what are the Assets that deplete the Age Pension? Here’s a (partial) list:
- Household contents and personal effects
- Motor vehicles, boats and caravans
- Collections, such as stamps or coins or antiques
- Financial investments, including cash, term deposits, shares (for further details on financial investments see SuperGuide article Age Pension income test: Deeming rates and deeming thresholds)
- Superannuation pensions (also considered a financial investment)
- Investment property
- Business assets
- Surrender value of life insurance policies
To calculate the kind of Pension a person or couple might be eligible for is quite simple because Centrelink provides an online calculator.
This is only a simplistic summary and there are all kinds of tests, provisions, transition rules and other factors that affect the Age Pension so anyone wanting a full outline should have a financial adviser set it out for them, but this is a useful guide for when you are doing your gap analysis.
Naturally, this assumes the Age Pension will be available at the rates quoted once the individual or couple retires, and that is a big unknown and a significant risk in any plan which relies upon it. That is not to say that the Age Pension will cease any time in the foreseeable future but there’s little doubt it will be messed with by successive governments and could be reduced or delayed at any time.
Written by Kristy Thomas