The Age Pension assets test is one of the tests that you must pass if you plan to claim the Age Pension. The Age Pension assets test involves 2 main thresholds, with the lower assets threshold determining if you will receive the FULL Age Pension and the higher assets threshold determining if you will receive the PART Age Pension.
Background: An eligible individual must satisfy the Age Pension assets test, and the Age Pension income 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 of Age Pension entitlement. If an individual fails one of the tests, then he or she will not be eligible for the Age Pension. An individual must also satisfy a residency test. For more information on the Age Pension rules work and the steps involved when claiming the Age Pension, see SuperGuide article How do I apply for the Australian Age Pension?
According to Centrelink, an asset for the purposes of the Age Pension assets test is any property or item of value that you or your partner own or have an interest in, including assets held outside Australia.
Centrelink takes into account nearly all assets a person owns, although there are some assets that are exempt from the Age Pension assets test – the most significant exempt asset is your principal place of residence.
Assessable assets for the Age Pension assets test include:
- Household contents and personal effects
- Motor vehicles, boats and caravans
- Collections, such as stamps or coins or antiques
- Financial investments, including cash, term deposits, shares (for further detail on financial investments see also SuperGuide article Age Pension income test: Deeming rates and deeming thresholds)
- Superannuation pensions (also considered a financial investment)
- Investment property
- Business assets
- Surrender value of life insurance policies
Other items that may also be considered assessable assets for the Age Pension assets test, but have more complicated rules, include:
- Retirement village contributions (the amount you pay, whether you are a homeowner and whether the contribution is considered an asset)
- Granny flat (special rules apply if you transfer assets to enable you to live in a property that someone else owns)
- Life interests (if you have a life interest in an asset, or you receive lifetime income from an asset, but not in all cases)
Some assets you own may be exempt from the Age Pension income test. The most well-known exempt asset is your home. Centrelink defines an exempt asset as a “a specific type of asset that we disregard irrespective of its value when we work out your payment rate”.
Quoting directly from the Centrelink (DHS) website, Centrelink considers the following assets exempt under the Age Pension assets test:
- Your principal home and generally up to 2 hectares of privately used, surrounding land on the same title
- Rural customers and primary producers with larger properties on the same title may be exempt in some cases
- Some income streams depending on their purchase date
- All Australian superannuation and rollover investments not in the drawn down phase in an approved fund until you reach age pension age
- Any property or monies left to you in an estate which you can’t get for up to 12 months
- A cemetery plot and either a prepaid funeral or up to 2 funeral bonds that cost no more than the allowable limit
- Aids for people with disability
- Monies received from the National Disability Insurance Scheme to provide for the needs of people with disability
- Principal home sale proceeds that you’ll use to buy another within 12 months – we deem the exempted amount and include it in the income test
- Most compensation or insurance payments for loss or damage to buildings or personal effects
- Accommodation bonds paid on entry to residential age care
- Your formal principal home if you entered aged care and:
- Paying or liable for an accommodation charge, and
- You rent out your former home
- Any interest not created by your or your partner including:
- Life interest
- Reversionary interest
- Remainder interest or
- Contingent interest
- A Special Disability Trust if it meets certain requirements and does not have assets over the concessional asset limit
- Your principal home if you temporarily vacate it for up to 12 months, and
- Granny flat rights where the amount transferred for the right was more than the extra allowable amount.
If you need more information on what assets are exempt from the Age Pension assets test, or you believe that Centrelink has included assets for the purposes of the Age Pension assets test, when they should have been exempt assets, then contact Centrelink on 13 23 00 or visit this link.
What happens if you gift assets to family members?
Gifting money or assets to relatives is not uncommon in this world, but if you do plan to gift assets, and you also plan to claim the Age Pension, then you need to be mindful of the gifting rules.
The gifting rules will apply to any assets you give away in the 5 years before you start receiving the Age Pension. The only exception is where you can convince Centrelink that at the time of gifting the asset you had no expectation that you would be eligible for the Age Pension.
As an Age Pensioner you can give away anything you want, but if you do, and your gift is outside the gifting rules, then expect your Age Pension benefits to be affected. If you do gift assets, then you need to notify Centrelink within 14 days of the gifting or transfer.
If you follow the gifting rules, any asset you have gifted won’t be assessed as a deprived asset and then subject to the deeming rules for the Age Pension income test (for information on the deeming rules and the Age Pension income test, see SuperGuide articles Age Pension income test: Deeming rates and deeming thresholds and Age Pension: Income test thresholds applicable since September 2017).
Following the gifting rules means not gifting more than the allowable gifting amount in a financial year, and Centrelink calls this the $10,000 rule. Centrelink also imposes a limit on gifting over rolling 5-year periods, and this 5-year limit is called the $30,000 rule.
According to Centrelink, the allowable gifting amount for a single person is $10,000 per financial year, with a maximum of $30,000 over a 5-year period. A couple has the same allowable gifting amount as a single person – $10,000 (combined) per financial year and $30,000 maximum over a 5-year period.
If you exceed these amounts, then the excess gifted amount will be treated as a deprived asset from the date of the gifting and for the following 5 years. The consequence of this treatment is that Centrelink will deem that you still own the asset, and assume a rate of return on that asset, regardless of whether you actually receive that return, and regardless of the fact that you no longer own that asset.
Centrelink may reconsider the decision to treat the gift as a deprived asset if the gift is returned.
For more information…
For more information about Age Pension assets test, see the following SuperGuide articles:
- Age Pension: Assets test thresholds applicable since September 2017
- Age Pension: Is my super benefit counted towards the assets test, or income test?
- Less Age Pension, and paid to fewer Australians since January 2017
For more information about the Age Pension rules generally, see the following SuperGuide articles:
- Australian Age Pension: 10 important facts you should know
- Age Pension: More Australians entitled to payments since September 2017
- Latest Age Pension rates (since September 2017)
- How do I apply for the Australian Age Pension?
- Age Pension: Income test thresholds applicable since September 2017
- Age Pension: Are you eligible for the Work Bonus?
- Take note: Age Pension age increasing to 67 years
- Age Pension: Does my superannuation lump sum count for income test?
- Age Pension income test: Deeming rates and deeming thresholds