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The rates for a full Age Pension for Australian residents for the period 20 March 2020 to 19 March 2021 are listed below:
- Single: $944.30 per fortnight (approximately $24,554 per year)
- Couple (each): $711.80 per fortnight (approximately $18,507 per year)
- Couple (combined): $1,423.60 per fortnight (approximately $37,014 per year)
- Couples separated due to illness each receive the Single rate (see above), which combined is $1,888.80 (approximately $49,109 per year)
Note: Annual amounts are estimated by multiplying fortnight amounts by 26. The figures above include the pension and energy supplements.
But not everyone is entitled to the maximum rate of pension…
Australia has a means tested social security system which is designed to work like a safety net. The more in assets or income you have, the less pension you may be entitled to.
If your assets or income exceed the cut off limits, you will not be eligible to a pension at all.
How the Age Pension works…
Centrelink apply the assets test and income test to determine how much pension you are entitled to.
The rate of pension that you will receive is based on which test provides the lower amount of pension.
For example
Maria is a retired single homeowner. She has $255,000 in assets with a deemed income of $180 per fortnight.
- Assets tested rate of pension = $909.05 per fortnight
- Income tested rate of pension = $940.89 per fortnight
Maria’s rate of pension = $909.05 per fortnight (the lower rate is used to determine your payment).
We have case studies at the end of this article which help explain everything in more detail.
How much assets or income can I have before my pension payments reduce?
Firstly it depends on whether you are single or a couple, and secondly, whether you are classed as a homeowner or non-homeowner.
Centrelink has an assets and income free area (threshold) which allows you to have a certain amount of assets and income before your rate of pension reduces.
If both your assets and income are below the asset/income free areas you will be entitled to the maximum rate of pension.
If your assets or income exceeds the free areas (thresholds) but are below the cut off limits then you will be entitled to a part (reduced) rate of pension.
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Assets test
Situation | Threshold | Cut off limit | |
---|---|---|---|
Single | Homeowner | $268,000 | $583,000 |
Non homeowner | $482,500 | $797,500 | |
Couple | Homeowner | $401,500 | $876,500 |
Non homeowner | $616,000 | $1,091,000 |
Income test
Situation | Threshold | Cut off limit |
---|---|---|
Single |
$178 per fortnight (approximately $4,628 per year) |
$2,066.60 per fortnight (approximately $53,732 per year) |
Couple |
$316 per fortnight (approximately $8,216 per year) |
$3,163.20 per fortnight (approximately $82,243 per year) |
How much assets or income can I have before my pension payments stop?
If you fail either one of the income or assets test you will not be entitled to a pension. To fail either test your assets and income would need to exceed the cut off limits listed in the above tables.
If you are not eligible for a pension you may still be entitled to a concession card depending on your circumstances.
How can I calculate my rate of pension?
To illustrate how the Age Pension rate decreases based on the value of assets and income, below are some examples of the current Age Pension payments that Australians should be eligible for at a range of different asset and income levels, provided that they also meet the other eligibility requirements (age and Australian residency).
Click on the name of each example to view.
Assets test
Example 1 – Single Homeowner
Assets value | Age Pension payment (per fortnight) | Age Pension payment (per year) |
---|---|---|
$268,000 | $944.30 | $24,552 |
$275,000 | $923.30 | $24,006 |
$300,000 | $848.30 | $22,056 |
$325,000 | $773.30 | $20,106 |
$350,000 | $698.30 | $18,156 |
$375,000 | $623.30 | $16,206 |
$400,000 | $548.30 | $14,256 |
$425,000 | $473.30 | $12,306 |
$450,000 | $398.30 | $10,356 |
$475,000 | $323.30 | $8,406 |
$500,000 | $248.30 | $6,456 |
$525,000 | $173.30 | $4,506 |
$550,000 | $98.30 | $2,556 |
$575,000 | $23.30 | $606 |
Example 2 – Single Non-Homeowner
Assets value | Age Pension payment (per fortnight) | Age Pension payment (per year) |
---|---|---|
$482,500 | $944.30 | $24,552 |
$500,000 | $891.80 | $23,187 |
$525,000 | $816.80 | $21,237 |
$550,000 | $741.80 | $19,287 |
$575,000 | $666.80 | $17,337 |
$600,000 | $591.80 | $15,387 |
$625,000 | $516.80 | $13,437 |
$650,000 | $441.80 | $11,487 |
$675,000 | $366.80 | $9,537 |
$700,000 | $291.80 | $7,587 |
$725,000 | $216.80 | $5,637 |
$750,000 | $141.80 | $3,687 |
$775,000 | $66.80 | $1,737 |
Example 3 – Couple Homeowner (combined)
Assets value | Age Pension payment (per fortnight) | Age Pension payment (per year) |
---|---|---|
$401,500 | $1,423.60 | $37,014 |
$425,000 | $1,353.10 | $35,181 |
$450,000 | $1,278.10 | $33,231 |
$475,000 | $1,203.10 | $31,281 |
$500,000 | $1,128.10 | $29,331 |
$525,000 | $1,053.10 | $27,381 |
$550,000 | $978.10 | $25,431 |
$575,000 | $903.10 | $23,481 |
$600,000 | $828.10 | $21,531 |
$625,000 | $753.10 | $19,581 |
$650,000 | $678.10 | $17,631 |
$675,000 | $603.10 | $15,681 |
$700,000 | $528.10 | $13,731 |
$725,000 | $453.10 | $11,781 |
$750,000 | $378.10 | $9,831 |
$775,000 | $303.10 | $7,881 |
$800,000 | $228.10 | $5,931 |
$825,000 | $153.10 | $3,981 |
$850,000 | $78.10 | $2,031 |
Example 4 – Couple Non-Homeowner (combined)
Assets value | Age Pension payment (per fortnight) | Age Pension payment (per year) |
---|---|---|
$616,000 | $1,423.60 | $37,014 |
$625,000 | $1,396.60 | $36,312 |
$650,000 | $1,321.60 | $34,362 |
$675,000 | $1,246.60 | $32,412 |
$700,000 | $1,171.60 | $30,462 |
$725,000 | $1,096.60 | $28,512 |
$750,000 | $1,021.60 | $26,562 |
$775,000 | $946.60 | $24,612 |
$800,000 | $871.60 | $22,662 |
$825,000 | $796.60 | $20,712 |
$850,000 | $721.60 | $18,762 |
$875,000 | $646.60 | $16,812 |
$900,000 | $571.60 | $14,862 |
$925,000 | $496.60 | $12,912 |
$950,000 | $421.60 | $10,962 |
$975,000 | $346.60 | $9,012 |
$1,000,000 | $271.60 | $7,062 |
$1,025,000 | $196.60 | $5,112 |
$1,050,000 | $121.60 | $3,162 |
$1,075,000 | $46.60 | $1,212 |
Income test
Example 1 – Single
Income | Age Pension | Combined | |||
---|---|---|---|---|---|
Per fortnight | Per year | Per fortnight | Per year | Per fortnight | Per year |
$178 | $4,628 | $944.30 | $24,552 | $1,122.30 | $29,180 |
$250 | $6,500 | $908.30 | $23,616 | $1,158.30 | $30,116 |
$500 | $13,000 | $783.30 | $20,366 | $1,283.30 | $33,366 |
$750 | $19,500 | $658.30 | $17,116 | $1,408.30 | $36,616 |
$1,000 | $26,000 | $533.30 | $13,866 | $1,533.30 | $39,866 |
$1,250 | $32,500 | $408.30 | $10,616 | $1,658.30 | $43,116 |
$1,500 | $39,000 | $283.30 | $7,366 | $1,783.30 | $46,366 |
$1,750 | $45,500 | $158.30 | $4,116 | $1,908.30 | $49,616 |
$2,000 | $52,000 | $33.30 | $866 | $2,033.30 | $52,866 |
Example 2 – Couple (combined)
Income | Age Pension | Combined | |||
---|---|---|---|---|---|
Per fortnight | Per year | Per fortnight | Per year | Per fortnight | Per year |
$316 | $8,216 | $1,423.60 | $37,014 | $1,739.60 | $45,230 |
$500 | $13,000 | $1,331.60 | $34,622 | $1,831.60 | $47,622 |
$750 | $19,500 | $1,206.60 | $31,372 | $1,956.60 | $50,872 |
$1,000 | $26,000 | $1,081.60 | $28,122 | $2,081.60 | $54,122 |
$1,250 | $32,500 | $956.60 | $24,872 | $2,206.60 | $57,372 |
$1,500 | $39,000 | $831.60 | $21,622 | $2,331.60 | $60,622 |
$1,750 | $45,500 | $706.60 | $18,372 | $2,456.60 | $63,872 |
$2,000 | $52,000 | $581.60 | $15,122 | $2,581.60 | $67,122 |
$2,250 | $58,500 | $456.60 | $11,872 | $2,706.60 | $70,372 |
$2,500 | $65,000 | $331.60 | $8,622 | $2,831.60 | $73,622 |
$2,750 | $71,500 | $206.60 | $5,372 | $2,956.60 | $76,872 |
$3,000 | $78,000 | $81.60 | $2,122 | $3,081.60 | $80,122 |
Example 3 – Couple (illness-separated, combined)
Income | Age Pension | Combined | |||
---|---|---|---|---|---|
Per fortnight | Per year | Per fortnight | Per year | Per fortnight | Per year |
$316 | $8,216 | $1,888.60 | $49,104 | $2,204.60 | $57,320 |
$500 | $13,000 | $1,796.60 | $46,712 | $2,296.60 | $59,712 |
$750 | $19,500 | $1,671.60 | $43,462 | $2,421.60 | $62,962 |
$1,000 | $26,000 | $1,546.60 | $40,212 | $2,546.60 | $66,212 |
$1,250 | $32,500 | $1,421.60 | $36,962 | $2,671.60 | $69,462 |
$1,500 | $39,000 | $1,296.60 | $33,712 | $2,796.60 | $72,712 |
$1,750 | $45,500 | $1,171.60 | $30,462 | $2,921.60 | $75,962 |
$2,000 | $52,000 | $1,046.60 | $27,212 | $3,046.60 | $79,212 |
$2,250 | $58,500 | $921.60 | $23,962 | $3,171.60 | $82,462 |
$2,500 | $65,000 | $796.60 | $20,712 | $3,296.60 | $85,712 |
$2,750 | $71,500 | $671.60 | $17,462 | $3,421.60 | $88,962 |
$3,000 | $78,000 | $546.60 | $14,212 | $3,546.60 | $92,212 |
$3,250 | $84,500 | $421.60 | $10,962 | $3,671.60 | $95,462 |
$3,500 | $91,000 | $296.60 | $7,712 | $3,796.60 | $98,712 |
$3,750 | $97,500 | $171.60 | $4,462 | $3,921.60 | $101,962 |
$4,000 | $104,000 | $46.60 | $1,212 | $4,046.60 | $105,212 |
The Age Pension rate increases twice per year (20th of March and 20th of September) and the income and asset thresholds adjust annually on the 1st of July.
How does deeming work?
The trickiest concept of how an Age Pension is calculated is called deeming.
Instead of asking pensioners what rate of return is achieved on financial assets (bank accounts, term deposits, shares, superannuation, account-based pensions etc) the Government ‘deems’ these assets to earn a set interest rate (irrespective of the actual rate of return).
The deemed income counts towards the income test.
The balance of the financial assets counts towards the assets test.
The deeming rates and thresholds from 1 July 2020 are listed in the table below.
Situation | Deeming lower rate | Deeming higher rate |
---|---|---|
Single | 0.25% on the first $53,000 of your investment assets, plus | 2.25% on your investment assets over the amount of $53,000 |
Couple | 0.25% on the first $88,000 of your combined investment assets, plus | 2.25% on your investment assets over the amount of $88,000 |
What if my circumstances change?
As your circumstances change (your assets or income increases or reduces) then you may be entitled to more or less pension.
It is extremely important that you advise Centrelink of any changes to your circumstances so that you are paid the correct rate of payment.
What is my Age Pension age?
The Age Pension has undergone some significant changes in recent times, in part, due to our ageing population and increased life expectancy.
As a result, the Age Pension age has increased and gender discrimination has been removed.
In years gone by, men and women had different age pension ages – they’ve now been brought into line with each other.
What does this mean for me?
The current Age Pension age is 66 years.
The Age Pension age is increasing to 67 over the coming years depending on your date of birth. The next increase is set for January 2020 at which time the pension age will increase to 66.
Date of birth | Age Pension age | Date that Age Pension age changes |
---|---|---|
Born between 1 January 1954 and 30 June 1955 | 66 years | 1 July 2019 |
Born between 1 July 1955 and 31 December 1956 | 66 years and 6 months | 1 July 2021 |
Born from 1 January 1957 onwards | 67 years | 1 July 2023 |
Case Studies
To assist in the explanation of how the Age Pension is assessed we have created some case studies.
- Case Study 1 is a simple explanation of a single homeowner who will receive a part
Age Pension. - Case Study 2 is broken up into two different scenarios. We will look at one of the strategies that can be employed to maximise pension entitlements for couples.
Case Study 1: Maria
Maria is a single homeowner who has retired from work.
Her assets are as follows:
- $5,000 in her everyday bank account
- $55,000 in a term deposit earning 2.5% per year
- $145,000 in an account based pension where she draws 5% per year income
- $50,000 in shares paying her 5% per year in dividends
- A car worth $15,000 and home contents of $5,000
Financial Assets | Amount |
---|---|
Bank Account | $5,000 |
Term Deposit (assumed 2.5% per year interest rate) | $55,000 |
Account Based Pension (drawing 5% per year of account balance) | $145,000 |
Shares (assumed dividends at 5% per year) | $50,000 |
Total Financial Assets | $255,000 |
Note: Maria’s car and home contents are not counted as financial assets
Deemed income
Asset | Deeming rate | Income | |
---|---|---|---|
$53,000 deemed at 0.25% per year | $53,000 | 0.25% | $132.50 |
Residual is deemed at 2.25% per year | $203,200 | 2.25% | $4,545.00 |
Total | $255,000 | $4,677.50 |
Assets and income test
Type | Asset | Income |
---|---|---|
Financial Assets (balance and deemed income) | $255,000 | $4,677.50 |
Car | $15,000 | |
Home contents | $5,000 | |
Total (per year) | $275,000 | $4,677.50 |
Total (per fortnight) | $179.90 |
- Assets test: Maria’s rate of pension under the assets test would be $923.30 per fortnight, which is a part pension rate.
- Maria has $275,000 of assets, which is $7,000 over the $268,000 threshold for Single Homeowners. This reduces her fortnightly pension by $21.00 ($3 for each $1,000 of assets), from $944.30 to $923.30.
- Income test: Maria’s rate of pension under the income test would be $943.30 per fortnight, which is a part pension rate.
- Maria earns $199.90 (in deemed income), which is $1.90 over the $178 income threshold for Singles. This reduces her fortnightly pension by $1 (50 cents for each dollar over the threshold), from $944.30 to $943.30.
You are paid the lower rate of the income and assets tests, so the Assets test ($923.20 per fortnight) applies in this scenario.
Cashflow
Age Pension | $24,003 per year ($923.20 per fortnight) |
Term deposit interest | $1,375 per year |
Account based pension | $7,250 per year |
Share dividends | $2,500 per year |
Total income | $35,128 per year |
You’ll notice that Centrelink will deem Maria to be earning $4,677.50 per year from her financial assets of $255,000.
Her actual income from the financial investments is $11,125 per year. Centrelink do not assess actual income, they only count the ‘deemed’ income towards the income test.
Case Study 2: Frank and Janet
Part 1
Frank and Janet are married and own their own home.
They have both retired from work, however only Frank (66) is Age Pension age. Janet (60) does not qualify for an Age Pension until she turns 67.
Their assets are as follows:
- They have $430,000 in the bank earning 2.5% per year interest
- Frank has $300,000 in an account-based pension drawing $30,000 per year income
- Janet has $100,000 in her superannuation (exempt until she reaches Age Pension age)
- They own one car each, worth $10,000 per vehicle
- Home contents of $10,000
Financial Assets | Amount |
---|---|
Bank Accounts | $430,000 |
Superannuation – Janet ($100,000 – exempt until Age Pension age) | $0 |
Account Based Pension – Frank | $300,000 |
Total Financial Assets | $730,000 |
Note: Frank and Janet’s cars and home contents are not counted as financial assets
Deemed income
Asset | Deeming rate | Income | |
---|---|---|---|
$88,000 deemed at 0.25% per year | $88,000 | 0.25% | $220 |
Residual is deemed at 2.25% per year | $642,000 | 2.25% | $14,445 |
Total | $730,000 | $14,665 |
Assets and income test
Type | Asset | Income |
---|---|---|
Financial Assets (balance and deemed income) | $730,000 | $14,665 |
Cars | $20,000 | |
Home contents | $10,000 | |
Total (per annum) | $760,000 | $14,665 |
Total (per fortnight) | $564.04 |
- Assets test: Frank’s rate of pension under the assets test would be $174.05 per fortnight, which is a part pension rate.
- Frank and his wife have $760,000 of assets, which is $358,500 over the $401,500 threshold for Couple Homeowners. This reduces his fortnightly pension by $537.75 ($3 for each $1,000 of assets, divided by two because Frank is the only member of the couple claiming an Age Pension), from $711.80 to $174.05.
- Income test: Frank’s rate of pension under the income test would be $649.80 per fortnight, which is a part pension rate.
- Frank and his wife’s deemed income is $564, which is $248 over the the $316 income threshold for Couples. This reduces his pension by $62.00 (50 cents for each dollar over the threshold, divided by two because he is the only member of the couple claiming an Age Pension), from $711.80 to $649.80.
You are paid the lower rate of the income and assets tests, so the Assets test applies in this scenario.
Cashflow
Age Pension | $4,525 per year ($174.05 per fortnight) |
Bank interest | $10,750 per year |
Account based pension | $30,000 per year |
Total income | $45,275 per year |
Frank’s rate of Age Pension is reduced significantly due to their large amount of combined assets.
You’ll notice that Janet’s superannuation is not counted towards Frank’s Age Pension.
This presents an opportunity to maximise Frank’s Age Pension if additional funds were invested into Janet’s superannuation which is exempt from assessment until she turns age 67.
Part 2
Frank and Janet receive personal financial advice and the following recommendations were made:
- Janet to contribute $100,000 from their bank savings into her superannuation as a non-concessional contribution immediately.
- Janet to contribute $300,000 from their bank savings into her superannuation as a non-concessional contribution utilising the bring-forward provisions in the following financial year
This will effectively remove $400,000 of assets from Frank’s Centrelink assessment until Janet turns Age Pension age.
Financial Assets | Amount |
---|---|
Bank Accounts | $30,000 |
Superannuation – Janet ($100,000 – exempt until Age Pension age) | $0 |
Account Based Pension – Frank | $300,000 |
Total Financial Assets | $330,000 |
Note: Frank and Janet’s cars and home contents are not counted as financial assets
Deemed income
Asset | Deeming rate | Income | |
---|---|---|---|
$88,000 deemed at 0.25% per year | $88,000 | 0.25% | $220 |
Residual is deemed at 2.25% per year | $242,000 | 2.25% | $5,445 |
Total | $330,000 | $5,665 |
Assets and income test
Type | Asset | Income |
---|---|---|
Financial Assets (balance and deemed income) | $330,000 | $5,665 |
Cars | $20,000 | |
Home contents | $10,000 | |
Total (per annum) | $350,000 | $5,665 |
Total (per fortnight) | $217.90 |
- Assets test: Frank’s rate of pension under the assets test would be $711.80 per fortnight, which is the maximum rate because he is under the assets test threshold.
- Income test: Frank’s rate of pension under the income test would be $711.80 per fortnight, which is the maximum rate because he is under the income test threshold.
In this scenario Frank would be paid the full rate of pension.
Cashflow
Age Pension | $18,507 per year ($711.80 per fortnight) |
Bank interest | $750 per year |
Account based pension | $30,000 per year |
Total income | $49,257 per year |
This strategy has resulted in an increase to Frank’s Age Pension of $14,255 per annum.
They have also increased their overall cashflow by over $4,000 per year.
Another benefit is that because Janet has retired from work, she has attained a ‘condition of release’. This means that she can access ad-hoc lump sums from her superannuation account whenever required.
Regan Welburn is the director of My Pension Manager, an administration service specialising in Age Pension applications and dealing with Centrelink. Regan previously worked for Centrelink as a Financial Information Service Officer and has an intricate knowledge of the Social Security system.
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