Social security exists to help those who need it, so the Age Pension is not simply handed out to everyone who reaches their pension age. To be eligible for the Age Pension, there are a few requirements that need to be satisfied before you’re able to receive a payment. On top of other Age Pension eligibility factors, the value of your possessions affects whether or not you qualify. This guide takes you through the assets test to help determine your eligibility.
Services Australia needs you to meet a range of requirements to receive the Age Pension. The most apparent condition you need to meet is age, as well as the income test, assets test, and Australian residency rules.
How does the assets test work?
Services Australia assesses the market value of the assets that you own individually or jointly with a partner. If the value of these belongings comes in under the test threshold, then you pass this aspect of the eligibility criteria.
A handy point to note is that your home is not included in the Age Pension assets test. This means that you could live in a mansion, and it would have no impact whatsoever on the test. This has caused controversy in the past with people concerned that wealthy Australians living in lavish homes shouldn’t need to access the Age Pension. However, the number of pensioners living in expensive homes is relatively low.
There are varying limits on the value of assets you can own for either a full or part pension. These limits depend on:
- Whether you own your own home
- Relationship status
- The age of your partner
- Your living arrangements
To receive the full amount of pension, your assets need to be below the following figures. If the value of your assets is above these amounts but less than the limit for a part-pension, your pension amount will progressively reduce until you reach the cut-off point.
Assets limit for the full pension
| Living arrangement | Homeowner | Non-homeowner |
|---|---|---|
| Single person | $301,750 | $543,750 |
| Couple | $451,500 | $693,500 |
Source: Services Australia, July 2023
Assets limit for a part pension
| Living arrangement | Homeowner | Non-homeowner |
|---|---|---|
| Single person | $674,000 | $916,000 |
| Couple (combined) | $1,012,500 | $1,254,500 |
| Couple separated due to illness (combined) | $1,196,000 | $1,438,000 |
Source: Services Australia, March 2024
Assets limits for the transitional pension
The income test was changed in 2009, which meant that some Age Pensioners in Australia would have begun to receive a lower pension rate after the changes were brought in. Rather than lower their pension amount, they were given a transitional pension. The idea is that they will continue to receive the transitional rate as long as it is more beneficial than being assessed under the latest income test.
The table below shows the limits for receiving a transitional pension.
| Living arrangement | Homeowner | Non-homeowner |
|---|---|---|
| Single person | $609,500 | $851,500 |
| Couple (combined) | $948,000 | $1,190,000 |
| Couple separated due to illness (combined) | $1,067,000 | $1,309,000 |
Source: Services Australia, March 2024
The asset limits are adjusted three times per year in March, July and September, according to the Consumer Price Index (CPI). The Age Pension amount is also usually increased according to CPI every year in March and September. However, the inflation calculations showed that the cost of living had reduced, so the pension amount was not increased in September 2020. This hadn’t happened since 1997.
What if I have current loans over my belongings?
Any loans you have over your assessable assets reduces the total market value of your assets. For example, If you have an investment property worth $500,000, and are currently paying off an investment loan of $100,000 for the property, the investment property will be assessed at $400,000.
What is included in the assets test?
Basically, all of your belongings are included in the test, except for your home. This includes assets that you only own in part, or have an interest in. If you have loaned money to someone or are owed a debt, this amount is also considered an asset.
Some examples of assets that you may own that would be considered in the test are:
- Real Estate. This includes investment properties and any houses left unoccupied that you might be using as a holiday home. The family home is not included.
- Home contents. Furniture, televisions, computers, power tools, and any item in your home worth a dollar figure.
- Personal effects. Jewellery is the obvious one here, but this even includes items such as collectibles kept as a hobby.
- Superannuation. Your super is only included if you’ve reached pension age. If you are applying for the Age Pension, obviously your super will be included in the test, but if your partner is below pension age, their super will not count towards your test.
- Vehicles. This includes cars, boats and caravans.
- Shares, term deposits and other financial products.
- Business assets. If you are in a partnership or are a sole trader, some work equipment will be counted as yours. If you have your business structured as a company, your level of control will be assessed to determine if any company assets will be included in your assets test.
What about my assets outside of Australia?
All of your assets, held anywhere in the world are included in the assets test. The value of any overseas assets will be converted into Australian dollars using the current exchange rate.
What if my assets change?
If you are receiving the Age Pension and the value of your assets change, you need to let Centrelink know within 14 days. This is because the value of your assets could affect your rate of payment.
Can I reduce my assets?
If you’ve passed all of the eligibility criteria except for the assets test, you might be tempted to try to get rid of some of your belongings or cash. There are acceptable strategies that can see you reduce the value enough to pass the assets test.
- Renovate your home. Keeping in mind that your home’s value isn’t included in the assets test, it’s possible to sell down some assets or use any cash on hand to renovate your home. Your wealth is essentially being transferred into the value of your home, which means you can reduce the value of your assessable assets without simply giving your money away (which is also an option!).
- Give your money away. You can reduce your assets by gifting money to friends or family. There are limits to this rule, though. You can gift up to $10,000 in a financial year or $30,000 over a rolling five year period. There’s nothing stopping you from gifting more than this if you’re feeling particularly generous, but for the assets test, any amount above this limit will be counted as part of your asset value for five years. For example, over the last five financial years, you’ve given away $50,000 to your children. $30,000 of this is under the limit so is not counted. The remaining $20,000 is counted toward your assets test for the next five years. Any gifting of money that has occurred more than five years prior to your Age Pension age will not be counted under the assets test at all. For example, if you are 61 and your pension eligibility age is 67, you are free to give away as much money as you like without impacting the assets test.
- Make a contribution to your spouse’s super fund. Superannuation is not counted toward the test unless you have reached the Age Pension age. If you have a younger spouse, their super may not count toward the limit — this gives you an option to transfer assets. It may even be possible for you to make the contribution from your own super, as a tax-free lump sum. There are tax implications to consider with this strategy, though. It’s possible that the returns generated from this contribution could be taxed at a higher rate in the super fund. The benefits can be easily weighed up by comparing both scenarios.
Summary
To receive the Age Pension, you must first pass the eligibility requirements, including the assets test. Your assets must fall below the limit to receive a pension. If your assets don’t quite pass the test, there are strategies that you can use to reduce the value of your assets so that you may be eligible for the Age Pension.
The information in this article is general in nature.