Accessing the Age Pension is easier than you think

Are you aged 66 years or over with a combined income under $80,610 per annum (couple) and less than $1.074 million (couple non-home owner) in assets? You may be eligible for a part Age Pension, Are you partnered and aged 66 years or over with a combined income under $81,172 per annum and less than $863,500 in financial assets (homeowner) or $1.074 million (non-homeowner)?  Or single with an income under $53,060 per annum and less than $574,500 in financial assets (homeowner) or $785,000 (non-homeowner)? You may be eligible for a part Age Pension, Brett Schatto writes. Brett Schatto writes.

Many Australians assume they can retire and fall back on the Age Pension but the full Age Pension (approximately $933.40 fortnightly for singles or $1,407 fortnightly per couple1) only provides for a very modest lifestyle.

On the flipside, many Australians assume they don’t qualify for the Age Pension when in fact around 70% of older Australians (particularly women) are eligible for a full or part pension plus a range of medical and transport concessions.

When planning for retirement, goal setting is important but the foundation of a comfortable, confident retirement is a steady and reliable income stream. For many older Australians, a part Age Pension is a valuable source of income while additional benefits like discounted healthcare, pharmaceuticals and transport help to stretch their dollar further.

Eligibility for the Age Pension depends on a person’s situation, namely their age, financial position and residency.

The Age Pension is means tested so Centrelink examines both income and assets.

To be eligible for the full Age Pension under the income test, singles need to receive less than $174 per fortnight and couples need to receive less than $308 per fortnight.

Those who exceed these limits, may still be eligible for a part pension.

The income limits for a part pension are $2,040.80 per fortnight (before tax) for singles and $3,122.00 per fortnight (before tax) for couples.

Assessable income includes:

  • Employment income (excluding the $300 fortnightly work bonus2)
  • Deemed income on super and financial investments;
  • Distributions from private companies and trusts; and
  • Rental property income.

On top of the income test, applicants must pass the assets test.

Under the rules, non-homeowner singles and couples can have up to $785,000 and $1.074 million respectively in assets and still potentially qualify for a part pension.

Homeowner singles and couples can have up to $574,500 and $863,500 respectively in financial assets and still potentially qualify for a part pension.

Assessable assets include:

  • Investment properties;
  • Super (accumulation) for people over age pension age;
  • Account based pensions and annuities;
  • Motor vehicles and boats;
  • Household contents;
  • Shares, managed funds and cash; and
  • Business assets.

The income and asset tests work together, meaning the pension amount a person is eligible for will be the lesser of entitlements under the asset and income test.

For example, if you’re eligible for $300 per fortnight, based on the assets test, and $450 per fortnight, based on the income test, then your pension entitlement will be $300 per fortnight.

If it sounds complex, that’s because it is.

Pre-retirees should also be mindful that how they access their superannuation, be that a lump sum or allocated pension, may impact their eligibility. Other factors that may impact eligibility include residency and relationship status.

Your financial adviser can explain the rules to you.

They can also review your financial situation and put together a retirement income strategy that maximises your cashflow including any Centrelink benefits.

Even if it appears you do not qualify for the Age Pension under the assets test, there are various strategies to reduce assessable assets such as:

  • Spending money on non-assessable assets such as upgrading the home, home renovations or prepaying funeral expenses
  • Allocating part of an older spouse’s superannuation to a younger spouse, if they are under Age Pension age
  • Purchasing a lifetime annuity
  • Gifting to family members within the limits

Your adviser can explain the benefits and limitations of each strategy.

If you’re in, or approaching, retirement it is important that you understand what you are entitled to so you can plan effectively.

The Age Pension rules are complex and constantly changing. They are sure to change again with the Treasurer recently announcing a review into Australia’s retirement income system which will include examining the adequacy and sustainability of the Age Pension.

Your financial adviser can help you stay on top of the Centrelink rules, maximise your entitlements and build a steady, reliable retirement income stream.  

To find out if you’re eligible for the Age Pension and the Commonwealth Seniors Health Card, contact Pride Advice in Adelaide on (08) 8168 8450 or in Sydney on 02 9222 1422.

Footnotes:

1. As at 20 September 2019

2. The work Bonus enables people to earn up to $300 per fortnight if they are still working.