Age Pension Asset Test
The Age Pension Asset Test reduces the Age Pension payable to seniors who have substantial assets apart from their homes.
The Age Pension is intended to protect seniors from living in poverty because they have no resources of their own to use.
The amount of Age Pension payable is reduced from the full rate if the senior has assets or other income. The Pension Means Tests are rules for determining any reduction in your Age Pension Payment rate.
Centrelink assesses you against the Asset Test and then against the Income Test. The Means Test that reduces your Pension rate the most is the Means Test that will be applied. Yes, that is, the Test that hits you the hardest will be used.
The Asset Test reduces your Age Pension payment by three dollars per fortnight for every one thousand dollars of ‘assessable assets’ over your Asset Test Allowance.
What counts for the Assets Test
Your ‘assessable assets’ includes everything that you own and/or are owed, plus any excess gift amounts.
Remember that if you are a member of a ‘couple at Centrelink’ then you must include all of the assets of both partners in your ‘assessable assets’. The only ‘concession’ is that if your partner has not attained Age Pension Age then their superannuation accounts still in accumulation phase are excluded from your joint ‘assessable assets’.
But all of both partners’ superannuation allocated pension accounts are included in your ‘assessable assets’ together with the Age Pensioner’s superannuation accounts in accumulation phase.
Any bequests that are coming to you could be included in your ‘assessable assets’ if the estate could be distributed. But the amount of any refundable lump sums paid for residential aged care accommodation are exempted from your ‘assessable assets’ amount.
Special rules allow for your principal place of residence to be excluded from your ‘assessable assets’. But this exclusion only covers the first two hectares of the block of land that your house sits on.
If you have a larger plot, such as a hobby farm then the land in excess of 2 hectares will be counted in your ‘assessable assets’. Similarly if your house and garden is actually on two Titles or you also own a holiday home, then the extra blocks of land on separate Titles from your principal place of residence, are counted in your ‘assessable assets’.
Read more about Age Pension Assessable Assets
Lower Asset Test Allowances for Homeowners
If you own your principal residence, then the value of your home is excluded from your ‘assessable assets’ for the Pension Asset Test. But the Asset Test Allowance is lower for ‘homeowners’ to take account of the benefit of owning a home.
In 2018, the additional Asset Test Allowance for non-homeowners was slightly over $200,000 as an acknowledgement of the value of home ownership.
Centrelink do not ask about the value of your home as the ‘principal residence’ is an exempt asset’ for the ‘homeowner’ Asset Test. But if the value of your equity in your home is well under $200,000 then you could ask Centrelink to treat you as a ‘non-homeowner’ and count your home equity as an assessable asset.
The Asset Test impact on a single senior.
The Asset Test reduces your Age Pension payment by three dollars per fortnight for every one thousand dollars of assessable assets over your Asset Test Allowance.
The Asset Test Allowance increased to $456,750 for a single non-homeowner as from July 2017. A single pensioner who owns her own home has an Asset Test Allowance of $253,750 in June 2018.
For example, Sue owns her own home and has just $10,000 in the bank. She also has a car ‘valued’ at $3,000. Centrelink expect that her ‘personal items and household contents’ count for another $3,000 of assets. Thus as a homeowner with $16,000 of assessable assets Sue is not impacted by the Asset Test.
But then Sue inherits her mother’s coastal cottage valued at $400,000. Sue now has $416,000 of assessable assets which is $162,250 over the Single Homeowner Asset Test Allowance in June 2018. Sue’s Age Pension is then reduced by $486.75 per fortnight under the Assets Test.
The Asset Test impact on a couple at Centrelink
For couples the Asset Test reduces the combined Pension by three dollars per fortnight for every one thousand dollars of the couple’s total combined assessable assets over the Asset Test Allowance.
The Asset Test Allowance is $380,500 for a non-homeowner couple at Centrelink in June 2018. A homeowner couple can have $583,500 of ‘assessable assets’ in addition to their home, before the Asset Test bites in June 2018.
The Asset Test reduces the individual Age Pension payments to each member of a couple by half of three dollars per fortnight, $1.50 per fortnight each, for every one thousand dollars of your total combined assessable assets over your Asset Test Allowance.
Consider Mike and Mary who own their home and a beach block now valued at $500,000. Mike and Mary have ‘personal items and household contents’ with a minimum value of $5,000 at Centrelink. They also have a motor vehicle valued at $20,000 and $15,500 in the bank. In total Mike and Mary have ‘assessable assets’ of $540,500.
Their homeowner Asset Test Allowance is $380,500 which is less than their ‘assessable assets’ of $540,500. The excess ‘assessable assets’ of $160,000 results in their combined Age Pension being reduced by $480 per fortnight. This reduction is applied as $240 per fortnight off each of Mike’s and Mary’s Age Pension payments.
Revising the Asset Test cutoff amounts
The Asset Test cutoff amount increase whenever the Age Pension rates are increased. Also the annual indexation of the Asset Test Allowances increases the cutoff amounts.
Therefore, the Asset Test cutoff amounts are expected to increase when the Age Pension rates are indexed each March and September. The Asset Test Allowance amounts are usually increased each July resulting in a further increase in the cutoff amounts.
But the cutoff amounts can be reduced if the Asset Test taper rate changes from the current three dollars per fortnight of Pension for each one thousand dollars of additional ‘assessable assets’. Also a change in the definition of ‘assessable assets’ could change the impact of the Asset Test for some seniors.
Help to understand how your situation fits in the Age Pension system.
Christine at Financial Care Services writes this Age Pension Guide. She can help you to understand your Age Pension situation.
Ask Christine to help you navigate your Age Pension challenge.
Contact Christine at Christine@financialcareservices.com.au or call 03 9808 0338 to book a consultation.
Christine at Financial Care Services is experienced with Pension Applications and the many Centrelink financial means tests.
Financial Care Services helps seniors with Centrelink Pension issues. Christine at Financial Care Services could help you check if you are eligible for an Age Pension.
An estimate of your potential Age Pension amount before you apply could spare you a rejection letter from Centrelink.
Financial Care Services offers ‘personal financial factual information’ consultations to help you check your asset and income position against the Centrelink Pension means tests. Christine is also able to assist with filling in your Centrelink forms ready for you to sign. She will accompany you to a Centrelink office to lodge your Pension claim form and show your proof of identity documents.
Financial Care Services charges hourly rate fees for ‘personal financial factual information’ consultations, assistance with personal data collation, completing Centrelink forms and attendance at a Centrelink office with you. Email Christine@financialcareservices.com.au now for the Financial Care Services Client Services Guide and Financial Care Services Age Pension Personal Data Checklist.
Disclaimer This Age Pension Guide is based on our understanding of the current Social Security provisions. Your claim for a Social Security Pension will be based on your personal situation as documented to Centrelink and the Social Security legislation and Regulations in force at that date.
Updated 18 June 2018
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