Use government benefits to help you fund retirement
The age pension is income support paid by the government with the aim of ensuring all retirees have a minimum level of retirement income
A person may be eligible for the age pension if they meet the following three tests:
The payment rates and thresholds are indexed each quarter and current rates are available from a financial planner or Centrelink.
If receiving the age pension, all changes to personal and financial circumstances need to be advised to Centrelink. This includes switching investments, gifting money or changes to personal circumstances e.g. separating from a partner. Age pension age is determined by your date of birth with a standard qualifying age of 67 applying for anyone born after 1 January 1957.
If eligible to apply, the amount of pension payable is calculated under two means tests – the income test and assets test. The test that results in the lower rate of payment is the one that applies.
Residency rules for Centrelink Aged Pension
To be eligible a person must usually have been an Australian resident for at least 10 years, with at least five of these years in one continuous period.
Agreements exist with some countries which may help a person to qualify for the age pension with less than 10 years residency. Details can be checked with Centrelink.
Income Test for Centrelink Aged Pension
If income is below a certain amount (lower threshold) the full age pension is payable under the income test. The pension will reduce by $0.50 per fortnight (single or couple combined) for each $1.00 of income over the threshold. No pension is payable if income reaches the upper cut-off threshold.
The lower thresholds are indexed on 1 July each year. The cut-off thresholds also increase on 20 March and 20 September in line with payment increases.
Assessable income may not be the same as actual income or taxable income. Specific rules apply to determine how much income is assessed on some investments. The most common rule is deeming, and this is explained below. The rules for how other sources of income are assessed can be checked with a financial planner or Centrelink.
Assets Test for Centrelink Aged Pension
Assets need to be below a certain amount (lower threshold) to qualify for the full age pension under the assets test. The pension will reduce by $3.00 per fortnight (single or couple combined) for each $1,000 of assets over the threshold. No pension is payable once assets reach the upper cut-off threshold.
The lower thresholds are indexed on 1 July each year. The cut-off thresholds also increase in March and September in line with pension increases.
Assets are assessed at net market value but some assets are exempt, such as the home and superannuation (accumulation phase) under age pension age.
A Pensioner Concession Card is available if you receive the age pension and entitles you to reduced-cost medicines under the Pharmaceutical Benefits Scheme.
You may also be entitled to various concessions from the Australian Government. These could include:
You may also be entitled to various concessions from state and territory governments and local councils. These could include:
An asset is any property or item of value either in Australia or overseas which is owned by you or your partner, or in which you have an interest.
Assessable assets include:
The value of assets is what you would get for them if you sold them (net market value) not what it would cost to replace them. Generally, any debt secured against an asset is deducted from the value of that asset.
Each $1,000 of assessable assets over the assets test threshold will reduce the maximum age pension by $3.00 per fortnight (per single or couple combined).
All income sources will be included in the income test and combined income is included for a couple. Different rules may apply to determine how the assessable part of the income is calculated.
Income sources include:
The actual income of financial investments is ignored and instead deeming rules apply.
Deeming assumes that financial investments earn a certain rate of income, regardless of the amount of income they actually earn. If the investment earns more than these rates, the extra income is not assessed. The deeming rates are reviewed in March and September each year in line with market interest rates.
By treating all financial investments in the same way, the deeming rules encourage people to choose investments on their merit rather than on the effect the investment income may have on their pension entitlement.
Term allocated pensions are assessed under the same rules as used for a grandfathered account-based pension but the deductible amount is calculated as: Annual income less (purchase price / the term selected)
For account based pension, from 1 January 2015, asset-tested income streams (long term) that are account-based are viewed as a financial asset and assessed under the deeming income test. This includes account-based pensions and account-based annuities. Account-based income streams held by income support recipients immediately before 1 January 2015 will be grandfathered and continue to be assessed under return of capital rules applying prior to 1 January 2015.
Term allocated pensions are assessed under the same rules as used for a grandfathered account-based pension but the deductible amount is calculated as: Annual income less (purchase price / the term selected)
For account based pension, from 1 January 2015, asset-tested income streams (long term) that are account-based are viewed as a financial asset and assessed under the deeming income test. This includes account-based pensions and account-based annuities. Account-based income streams held by income support recipients immediately before 1 January 2015 will be grandfathered and continue to be assessed under return of capital rules applying prior to 1 January 2015.
Lifetime annuities purchased prior to the 1st July 2019 are assessed ausing the following formula: AP - [(PP-RCV) ÷ RN]. Where AP is the annual payment, PP is the purchase price, RCV is the residual capital value and RN is the relevant number.
Lifetime annuities which meet the new Capital Access Schedule and are purchased post the 1st of July 2019 are assessed as follows: Under the income test 60% of the regular payments are assessed as income. Under the assets test 60% of the purchase price is assessed as an asset until the age of 84 or for a minimum of 5 years and then thereafter the assessment is reduced to 30% of the purchase price
These annuities are assessed under the same rules as used for a lifetime annuity purchased prior to 1st of July 2019 but the purchase price is reduced by any residual capital value (RCV). The RCV is the amount agreed to be returned at a future point in time. The deductible amount is calculated as: Annual income less [(P/P – RCV) / term selected]
These annuities are included in the definition of financial assets and are assessed under deeming rules. If however, the term chosen is longer than the person’s life expectancy the assessment method used for an account-based pension will also apply.
The Commonwealth Seniors Healthcare Card (CSHC) is a concession card that get cheaper health care and some discounts if you’ve reached age pension age. It has a number of conditions, benefits and things to consider as discussed below.
A Commonwealth Seniors Health Card (CSHC) card you can get:
Your state or territory government and local council may offer you more. They may lower your:
Read more about what you can get where you live on the australia.gov.au website
You can qualify for a Commonwealth Seniors Health Card if you:
The government review this test on 20 September each year in line with the Consumer Price Index. The income test will look at your:
To pass the income test from 20 September 2023, you must earn no more than:
Add $639.60 to these amounts for each child in your care. There is no assets test.
Account based income streams are assessed as part of the income test. Account based income streams include account based pensions and account based annuities.
The balance of an account based income stream is subject to deeming. Deeming assumes that financial investments are earning a certain rate of income.
Deeming rules will only apply if:
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