Age Pension: More Australians entitled to payments since July 2016

In March, July and September of each year, the federal government changes the rules for claiming the Age Pension… for the better! Currently, the Age Pension income test and the Age Pension assets test are adjusted three times a year in line with increases in the Consumer Price Index.

Effective since 1 July 2016, the income and assets tests are adjusted again which means eligible Australians can own more assets and earn more income and still be eligible for a PART Age Pension. Also, those Australians who may have just missed out on the Age Pension due to failing the income test, or assets test, may now be entitled to some Age Pension.

Note: Age Pension rates were increased, effective from 20 March 2016 (and applicable until 19 September 2016). See later in this article for link to the latest Age Pension rates.

The investment markets have been volatile in recent times, which means the portfolios of retirees may have changed in value over the past few months (especially with the recent extreme volatility on the Australian and international share markets). Volatile markets may also mean that previously ineligible Australians may now meet the income and assets tests, or that the level of entitlements for eligible Australians has changed.

How the Age Pension rules work: An eligible individual must satisfy the Age Pension income test, and the Age Pension assets test to receive a FULL, or PART, Age Pension. The amount of Age Pension will be based on the test that delivers the lowest amount on Age Pension entitlement. If an individual fails one of the tests, then he or she will not be eligible for the Age Pension.

Age Pension payments

The actual rate of Age Pension is adjusted twice a year, in March and September. Currently, the Age Pension is adjusted in line with the highest of the Consumer Price Index, Male Average Weekly Total Earnings (MWATE) and Pensioner and Beneficiary Living Cost Index increases. The Pensioner and Beneficiary Living Cost Index is designed to index base pension rates when the living cost index is higher than the Consumer Price Index (inflation).

You can find the latest Age Pension rates in the SuperGuide article Age Pension: March 2016 rates now apply (until September 2016).

Note: You can also check out our special SuperGuide articles, if you’re seeking information on any of the following:

Age Pension assets test

The LOWER threshold of the Age Pension assets test, that is, the asset limit (‘assets test free area’) that entitles an individual to a FULL Age Pension, is adjusted in line with the Consumer Price on 1 July of each year.

The assets test UPPER threshold however, is adjusted on 1 July of each year, and is also adjusted in March and September of each year. The UPPER threshold is the limit that determines an individual’s eligibility to a PART Age Pension. Due to the six-monthly changes in the Age Pension rate, the UPPER threshold of the Age Pension assets test is adjusted 3 times a year – in March, July and September.

Since 1 July 2016, the assets test UPPER threshold for home-owners has increased by $3,500 for singles and $5,000 for couples. What this means is that single home-owners can have more than $790,000 in assets (excluding their home) and still be eligible for a small  PART Age Pension – the Age Pension cuts out when a single home-owner holds $791,750 in assets (excluding their home).

Since 1 July 2016, home-owning couples can have more than $1.17 million in assets (excluding the home) and still claim a small PART Age Pension – the Age Pension cuts out when a home-owning couple holds $1,175,000 in assets.

You can find the latest thresholds for the assets test for the FULL or PART Age Pension, including the Transitional pension assets test thresholds, in the SuperGuide article: Age Pension: Assets test thresholds applicable since July 2016.

Age Pension income test

The LOWER threshold of the Age Pension income test, that is, the income limit that entitles an individual to a FULL Age Pension, is adjusted in line with the Consumer Price Index on 1 July of each year.

The income test UPPER threshold however, is adjusted on 1 July of each year, and also adjusted in March and September of each year. The UPPER threshold is the limit that determines an individual’s eligibility to a PART Age Pension. Due to the six-monthly changes in the Age Pension rate, the UPPER threshold of the Age Pension income test is adjusted 3 times a year – in March, July and September.

Since 1 July 2016, the income test UPPER threshold has increased by $2.00 per fortnight (roughly $104 a year) for singles, and $4.00 per fortnight (roughly $208 a year), for couples. What this means is that a single person can earn $1,911.80 a fortnight (the equivalent of around $49,707 a year), while a couple (combined) can earn nearly $2,926.80 a fortnight (the equivalent of roughly $76,097 a year), before they lose the entitlement to a PART Age Pension.

You can find the latest income test thresholds, including Transitional pension income test thresholds, for the FULL or PART Age Pension, in the SuperGuide article: Age Pension: Income test thresholds applicable since July 2016.

Note: DHS is responsible for the Centrelink website. Instead of visiting a stand-alone Centrelink website, you now need to visit the Department of Human Services website (www.humanservices.gov.au), and access the Centrelink section within the DHS website.

More information on Age Pension changes

For more information on the Age Pension changes, see the following SuperGuide articles:

Comments

  1. Hi Barbara and John

    The question you pose is one that many retirees struggle with. However, it is easy to answer once you look at your needs and wants in a comfortable retirement.

    Questions that must be addresses are 1 Are children still at school ? At university ? Living at your home…All three are costly to you and will alter your retirement date.

    2. Home much net $ are you earning now ? What do you think you will need in retirement ?

    3. How is your health ???? 4. How long do you really expect to live ? ( 80 y/o ?? )
    5. What is the worst case scenario if you run out of money at age 75 ??

    This hypothetical is more or less based on John’s response and the experience of some friends of mine.

    1. Aged 56 and 55…..male with health issues and spouse in good health
    2. Owned home valued at $1.3 mil and Superannuation of $1.2 mil
    3. Children have left home and have good jobs and all have a home and a mortgage

    Action taken; Commenced SMSF !!!

    1. Sold the large 4 bed family home, bought a near new 2 bedroom unit on the Gold Coast Qld near the beach. The city has all the amenities close by and great weather. After the sale/purchase couple had $600 k net. They invested $540k in super for the female, which left $60 k for whatever. ( Also sold the 2nd car not much cash)

    2. New super balance of $1,740,000 invested thus…. $540,000 in T/D at 3.50% = $ 18,900 pa. and Shares worth $1,200,000 at ~ 5% earning $60,000 pa which comes with a tax refund of almost $12,000 in franking credits which increased income from equities to ~$72,000 less accountancy and audit fees of ~$3000 left them with $69,000.net

    Add the $69,000 + $18,900 and income is $87,900 TAX FREE !

    They kept a whopping $540,000 or approx. 7 years living expenses at $80,000 per annum to allow for any dramatic moves in the stockmarket. They did not wish to sell in a down market and conservatively thought that $80k per annum tax free would provide a comfortable retirement, no matter how the shares were doing…but still paying dividends.

    With the above scenario they are as happy as little piggies in mud.!!….they say that they have more money now than ever and only one car is needed.

    It may sound simplistic but it is simple if you look long and hard at your personal circumstances.

    Most of us will not live until 100 or even 90 y/o…..so why worry. Most of your needs are between 55y/o and 6 y/o as after that age you slow down, buy less clothes, go on fewer o/s vacations etc. etc.

    The worst case scenario, should you run short of cash is to go back to work.

    Going back to work is not something new for any of us….remember to enjoy life and the fruits of all your hard earned labour.

    After all most of us gave our best 40 years to the company, so now it your turn to live a little and enjoy a stress free retirement, hopefully spoiling your grandchildren.

    PS…..Bonus, Bonus,…Family visits are frequent as the children and grandchildren enjoy the Qld vacations.

    • thanks Shylock. All excellent info and appreciated. If there is anyone else “out there” that is inclined to comment on that or on strategies, please feel free to do so !!

      • GDay again Shylock
        where u mentioned
        The worst case scenario, should you run short of cash is to go back to work.

        for many reasons this is often not an option for the mature aged demographic

  2. Trish, my husband and I feel like we’re caught in-between, so to speak, in that at 55-years, we are not fabulously wealthy but now not ‘eligible’ for anything owing to the value of our home plus savings. Is it best to keep working (from hereon in) for as long as we’d both like to, but then just ‘spend it’ relatively conservatively until we hit the eligibility threshold? We’ve either got to go really hard for the next 10-15 years or say to ourselves ‘that’s enough now’ and take it as it comes. Do you have any other types of comments you receive like this and what strategies do you think are wise?

    • Hi Barbara
      I know where your coming from re “caught in-between”. The value of your home is not included or calculated by Centrelink (or whatever they call themselves these days). I believe you both have to wait until age 67 now to be eligible for an aged (govt) pension so you need to continue to work until then although Superguide can confirm that.
      We have similar problem. I am 68, my wife is 63 and we have approx $1.2 mill in assets excluding our home ($1.2 mill includes a rental house and superannuation). So what I am doing is continuing to work casual but about 40 hours per week (commission only these days for a company that pays pitiful amount using my ABN number). Also have a pension coming out of my super in pension phase ($33K per annum).
      Basically my intention in this reply (as well as to try and answer your question) is to see if anyone “out there” can comment re your point “any other types of comments you receive like this and what strategies do you think are wise ?”

      • John,

        You’re a MULTI MILLIONAIRE. You don’t have to work. You’ll almost certainly be dead within 20 years. Take it easy. Enjoy life.

        Jim.

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