Noel Whittaker's Blog The age pension represents a major source of income for most retirees – yet many are unaware of the tricks and traps. It’s a big topic, so in a two-part series starting today I will explain the system to you.
The pension is adjusted on a regular basis and the latest six-monthly age pension adjustments took effect from 20 March 2021. The main changes were a slight increase in the amount of the age pension, which also lead to an increase in the cut off points for both the assets test and the income test. The maximum pension for a single person is now $952.70 a fortnight, and for a couple $718.10 a fortnight each.
Everybody is allowed a certain base level of income and assets, but once you exceed the base level the pension reduces. For income test purposes the pension reduces by $0.50 for every additional dollar earned over the threshold, and by three dollars a fortnight for every $1000 of assets over the bottom limit.
The lower asset limits are $268,000 for a single pensioner and for a couple $401,500. Once these levels are exceeded the pension tapers until it reaches the upper cut off point where no pension is payable. The base income threshold is $316 a fortnight for a couple and $178 fortnight for a single.
The cut-off point for a homeowner couple has gone up to $880,500 and for a single pensioner $585,750. For non-homeowners the numbers are $1,095,000 and $800,250 respectively. The income test cut-off points are now $82,898.40 per annum for a couple and $54,168.40 for a single.
How do you qualify? First, you have to be of pensionable age which depends on the date you were born. For people born between 1 January 1954 and 30 June 1955 pensionable age is 66, for people born between 1 July 1955 and 31 December 1956 it’s 66.5 years and for those born on or after 1 January 1957 it is 67.
If one partner is eligible, and the other is under pensionable age, the eligible partner receives half the couple’s pension. For example, a 67 year old with a 59 year old partner could qualify for 50% of the couple’s pension.
You are tested under both an assets and an income test, and Centrelink applies the test that gives you the least pension. Consider a homeowner couple with assessable income of $700 a fortnight and assessable assets of $740,000. Their pension under the income test would be $622.10 a fortnight each – under the assets test $210.35. Therefore, they would qualify for an age pension of $210.35 a fortnight all each
The value of your assets does not include your family home, while your chattels such as furniture, car and boat are valued at second hand value, not replacement value. This puts a figure of $5,000 on most people’s furniture.
The income test includes items such as employment income, overseas pensions and rents received- financial assets are given a deemed income. They are deemed to be earning .25% for the first $88,000 ($53,000 for singles), and 2.25% on the balance. For example, if a couple had $488,000 of financial assets their deemed income would be $9,220 a year being .25% for the first $88,000 ($220) and 2.25% on $400,000 ($9,000).
There is a deeming calculator and an age pension calculator on my website www.noelwhittaker.com.au.
The term “financial assets” includes interest bearing deposits, shares, managed funds, and money in superannuation if the fund member has reached pensionable age, However, it does not include property. The property value less any mortgage on that property are used for the assets test, and the net rental income after expenses is used for the income test.