About the Government aged pension

The Government Age Pension is a regular, periodic payment made to eligible persons by the Government.

There are three tests that will be applied to determine whether you are eligible for the Age Pension issued by Centrelink or the Department of Veteran’s Affairs. You also need to meet certain residence requirements.

Whichever test provides the lowest benefit to you (i.e. reduces your entitlement the most) will be the one that is applied.

1) Age Test

The Age Test is:

• 65 years for men
• 60-65 for women, depending on when you were born.

Age Pension – Qualifying age for women

If you are entitled to a Department of Veterans Affairs pension, the Age Test is:

• 60 years of age for men
• 58-60 for females, depending on when you were born and your qualifying service period. Visit www.dva.gov.au for details.

2) Assets Test

The Assets Test is based on the value of any assessable assets you own.

The asset thresholds applicable to a single person or couple who rent or own their home are as follows.

As you can see, if you are a single homeowner you may be able to receive a full pension if your assets are less than $166,750. For every $1,000 above this amount, you lose $1.50 off your Age Pension (each fortnight). When your assets reach $535,250 you will no longer qualify for any Age Pension. The same principles apply to other categories.

If the value of your assets falls between these limits, you may be entitled to a part pension.

Assessable assets include:

• Any cash or money you have in bank, building society or credit union accounts
• Fixed deposits, bonds, debentures, shares, property trusts, friendly society bonds and managed investments
• Superannuation and rollover funds if you are of Age Pension age
• Real estate, including holiday homes, you own (this does not include your principal home)
• The value of gifts worth more than $10 000 in a single year or more than $30 000 in a five year period
• The value of any loans (including interest free loans) you have made
• Motor vehicles you own
• Boats and caravans you own which you do not use as a home
• Household contents and personal effects
• Collections you have for trading, investment or hobby purposes
• Account-based income streams
• Non-account based income streams purchased post 19 September 2007.

The total value of your AustralianSuper Pension, if applicable, will be considered an assessable asset. Your family home is excluded under this test.

3) Income Test

Income is any money, profits or valuable consideration you may have earned, derived or received. Income also includes deemed income on investments as well as income from outside Australia.

The amount of income you and your partner receive may affect the amount of your Government Age Pension.

The income thresholds applicable to both a single person and a couple are as follows:

If the income you receive (other than your Age Pension) falls between these limits, you may be entitled to a part pension. Income over the ‘Full Pension’ threshold reduces the amount of Age Pension payable by 40 cents (single) and 20 cents (couples) in the dollar.

Note that income includes earnings from salaries and wages and net income from rental property. Income such as interest and dividends are assessed under the ‘deeming rules’. Special rules also apply to pension payments received from your AustralianSuper Pension, formally referred to as an account-based pension.

Deeming rules

Any income you get from financial investments* is assessed under one simple set of rules, known as deeming. Deeming assumes your financial investments are earning a certain rate of income, no matter what income they are actually earning. Deeming rules discourage people from parking their money in low-interest bank accounts to increase their pension eligibility under the income test.

From 1 July 2007:

• If you are single, the first $39,400 of your financial investments is deemed to earn income at 4% per annum and any amount over that is deemed to earn income at 6% per annum, or
• If you are a member of a couple, the first $65 400 (combined) of your and your partner's financial investments deemed to earn income at 4% per annum and any amount over that is deemed to earn income at 6% per annum.

* A financial investment is monies in:

• Banks, building societies, credit unions
• Term deposits and debentures
• Managed investments
• Friendly society bonds
• Listed shares and securities, and
• Approved deposit funds, retirement savings accounts and superannuation funds held by people over Age Pension age (excludes account-based pensions).

This list is not exhaustive.

AustralianSuper Pension

The income you receive from your AustralianSuper Pension, if applicable, will count towards the income test. However, only some of the income paid from your AustralianSuper Pension (if applicable) is counted under the income test. This is referred to as the ‘assessable amount’. The amount included under the income test for your AustralianSuper Pension is calculated as follows:

Pension payment (pa) less (amount invested to establish your AustralianSuper Pension minus any withdrawals) divided by life expectancy.

Please note that if your select the Reversionary Pensioner option, a different assessable amount may apply.

Example

Peter is 65 years old and commences an AustralianSuper Pension on 1 July 2008. He invests $200,000 and decides to receive $12,500 pa in pension payments.

Under the Assets Test, the total value of Peter’s AustralianSuper Pension is counted as an asset (i.e. $200,000).

The amount assessed under the Income Test is calculated as follows:

= $12,500 less ($200,000/18.30*)
= $12,500 less $10,928
= $1,572 pa

Although, Peter is receiving a yearly pension payment of $12,500 pa, only $1,572 pa will be assessed as income under the Income Test.

Peter will be entitled to a partial pension on both the Assets and Income Test, assuming he has no other assets or income to be counted. The actual amount paid will also depend on marriage status and which Test gives the lower result.

_{* Source: 18.30 represents the life expextancy of a male aged 65 based on the Australian Bureau of Statistics (ABS) life expectancy tables released 9 November 2007. To view the ABS life expectancy tables visit www.abs.gov.au}