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A common question for people nearing or in retirement is ‘How much money can I have before it affects my pension?’. The answer lies in the total value of your savings and other assets and your income.
This article details the rules of the Age Pension assets test, which is one half of the means test used by the Department of Human Services to determine how much Age Pension you could be eligible for.
You must also pass the Age Pension income test, have reached your eligibility age and satisfy Australian residency rules.
Statistics consistently indicate that more retirees pass the Age Pension assets test than the income test. According to the Centre of Excellence in Population Ageing Research (CEPAR), only one-third of Australians receiving part pensions have too much assessable wealth (assets) to be eligible for the full pension. The other two-thirds are ineligible to receive the full pension because they earn too much income. CEPAR research also reveals that 54% of full pensioners have assessable assets worth below $50,000.
How does the Age Pension assets test work?
The market value of any assets you or your partner own will be assessed by the Department of Human Services (via Centrelink) to determine your potential eligibility for the Age Pension.
According to recent research by the ANU Centre for Social Research and Methods, 73% of households with at least one Age Pensioner are homeowners and 17.6% of these households have a home worth more than $1 million.
Any debts owing on assets other than your home is subtracted from their market value for the purposes of your assets test assessment. For example, if you have an investment property valued at $600,000 and you still owe $200,000 to the bank for the loan you obtained to buy it, the value of your investment property asset will be assessed at $400,000.
To be eligible for either a full or part pension, there are limits on the value of the assets you (and your partner combined) can own. The limits depend on whether you own your own home, as well as your living arrangements (including if you have a partner and whether they are age-eligible for the pension or not). The assets limits are higher for non-homeowners in recognition of the higher cost of housing for pensioners who rent their home.
The current asset limits are itemised in the tables below. To be eligible for a full Age Pension the value of your assets must be below the following thresholds.
Age Pension asset limits (July 2020)
Assets limits for a full Age Pension
| Situation | Limit (1 July 2020 to 30 June 2021) | Previous Limit (1 July 2019 to 30 June 2020) | Increase | |
|---|---|---|---|---|
| Single | Homeowner | $268,000 | $263,250 | $4,750 |
| Single | Non-homeowner | $482,500 | $473,750 | $8,750 |
| Couple (combined) | Homeowner | $401,500 | $394,500 | $7,000 |
| Couple (combined) | Non-homeowner | $616,000 | $605,000 | $11,000 |
Source: Department of Human Services
If the value of our assets is above the thresholds in the above table, you may still be eligible for a part Age Pension. The table below shows the maximum values of assets you can hold to still be eligible to receive any part pension payment.
The amount of Age Pension you are eligible for reduces by $3 per fortnight per $1000 of assets until it cuts off completely when the value of your assets exceeds the figures below.
Assets limits for a part Age Pension (Residents)
|
Situation |
Limit (1 July 2020 to 19 March 2021) |
Previous limit (20 March 2020 to 30 June 2020) |
Increase |
|
|---|---|---|---|---|
| Single | Homeowner | $583,000 | $578,250 | $4,750 |
| Single | Non-homeowner | $797,500 | $788,750 | $8,750 |
| Couple (combined) | Homeowner | $876,500 | $869,500 | $7,000 |
| Couple (combined) | Non-homeowner | $1,091,000 | $1,080,000 | $11,000 |
| Couple (illness-separated, combined) | Homeowner | $1,031,500 | $1,024,500 | $7,000 |
| Couple (illness-separated, combined) | Non-homeowner | $1,246,000 | $1,235,000 | $11,000 |
Source: Department of Human Services
To illustrate how the Age Pension rate decreases based on the value of assets, below are some examples of the current Age Pension payments that Australians should be eligible for at a range of different asset levels, provided that they also meet the other eligibility requirements (age, passing the income test and Australian residency).
Note: The examples include the Pension supplement and Energy supplement.
Click each example name to view.
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 |
Assets limits for a part Age Pension (Non-residents)
The assets limits for non-residents are slightly lower, and summarised in the table below.
|
Situation |
Limit (1 July 2020 to 19 March 2021) |
Previous limit (20 March 2020 to 30 June 2020) |
Increase |
|
|---|---|---|---|---|
| Single | Homeowner | $563,000 | $558,250 | $4,750 |
| Single | Non-homeowner | $777,750 | $768,750 | $8,750 |
| Couple (combined) | Homeowner | $847,500 | $840,500 | $7,000 |
| Couple (combined) | Non-homeowner | $1,062,000 | $1,051,000 | $11,000 |
| Couple (illness-separated, combined) | Homeowner | $991,500 | $984,500 | $7,000 |
| Couple (illness-separated, combined) | Non-homeowner | $1,206,000 | $1,195,000 | $11,000 |
Note: You also need to pass the income test and age and residency requirements.
The Age Pension assets limits are adjusted three times a year based on movements in the consumer price index (CPI). The thresholds for the full Age Pension change in July, while thresholds for the part Age Pension change in March and September.
Assets limits for a transitional part Age Pension (Residents)
Some Age Pensioners in Australia are on transitional pensions. Transitional pensions rates are paid to people who would otherwise be getting a lower payment when changes to the income test were introduced in 2009. From 20 March 2020, transitional rate pensions cancel when your assets are more than the limit for your situation.
The table below shows the asset value cut-off points for receiving a transitional pension.
|
Situation |
Limit (1 July 2020 to 19 March 2021) |
Previous limit (20 March 2020 to 30 June 2020) |
Increase |
|
|---|---|---|---|---|
| Single | Homeowner | $531,250 | $526,500 | $4,750 |
| Single | Non-homeowner | $745,750 | $737,000 | $8,750 |
| Couple (combined) | Homeowner | $826,500 | $819,500 | $7,000 |
| Couple (combined) | Non-homeowner | $1,041,000 | $1,030,000 | $11,000 |
| Couple (illness-separated, combined) | Homeowner | $928,000 | $921,000 | $7,000 |
| Couple (illness-separated, combined) | Non-homeowner | $1,142,500 | $1,131,500 | $11,000 |
Note: You also need to pass the income test and age and residency requirements.
Assets limits for a transitional part Age Pension (Non-residents)
|
Situation |
Limit (1 July 2020 to 19 March 2021) |
Previous limit (20 March 2020 to 30 June 2020) |
Increase |
|
|---|---|---|---|---|
| Single | Homeowner | $505,000 | $500,250 | $4,750 |
| Single | Non-homeowner | $719,500 | $710,750 | $8,750 |
| Couple (combined) | Homeowner | $798,000 | $791,000 | $7,000 |
| Couple (combined) | Non-homeowner | $1,012,500 | $1,001,500 | $11,000 |
| Couple (illness-separated, combined) | Homeowner | $875,500 | $868,500 | $7,000 |
| Couple (illness-separated, combined) | Non-homeowner | $1,090,000 | $1,079,000 | $11,000 |
Note: You also need to pass the income test and age and residency requirements.
What is included in the Age Pension assets test?
Examples of assets that you or your partner may own that will be included in your assets test are any of the following:
- Real estate (excluding your family home). For example, investment properties or a granny flat that you own on a property that belongs to someone else
- Household contents. It’s important to note that even though the market value of your family home is excluded from the assets test, the market value of any of your household contents (such as furniture and appliances) is included. The market value of these items is what you would get for them if you sold them in their current condition, not what you paid for them
- Superannuation balances if both you and your partner have reached the Age Pension eligibility age, including the balance of your pension accounts that provide you with an income stream. If your partner is below the Age Pension eligibility age, their super balances will notbe included in your assets test
- Other financial investments, like term deposits or any surrender value of life insurance policies
- Retirement village contributions
- Business assets
- Motor vehicles
- Boats
- Caravans
- Jewellery
- Cryptocurrencies
Can you give some of your assets away to get under the assets test threshold?
Yes, you and your partner can do this, but there are limits to the value of the assets you can give away before your Age Pension will be affected.
Also be aware that you don’t necessarily have to give away an asset for free for it to be considered a gift. Assets transferred for less than their market value are also considered to be gifts in terms of the discount provided.
Centrelink will assess any gifts you make over a five-year period. You can’t gift assets worth more than $10,000 in any one financial year and you can’t gift assets worth more than $30,000 over any five-year period. If you do, the excess amount will be included in your assets test and the deeming rate will also be applied to it for the purposes of your income test.
What if you or your partner own assets overseas?
These assets will be included in your assets test. The overseas value of the assets will be the amounts converted to an equivalent Australian dollar value using current exchange rates.
What happens if the value of your assets changes?
If you’re receiving a full or part Age Pension, you need to inform Centrelink of any changes to the value of you or your partner’s assets within 14 days. For example, when you buy new assets or sell existing ones, because this will increase or decrease the total value of your assets.
Centrelink will then reassess your correct Age Pension entitlement. If you’ve been overpaid the Age Pension since the value of your assets has increased, you’ll be required to repay the excess amount. On the other hand, if you’ve been underpaid, you’ll be reimbursed.
Hardship provisions
If you’re suffering severe financial hardship and the value of your assets is either preventing you from getting any Age Pension or you’re receiving a reduced amount, you can apply to Centrelink to review your eligibility.
Centrelink will use the following criteria when assessing your claim:
- You own an asset which is difficult to sell
- You can’t borrow against the asset’s value
- You qualify for the Age Pension under the income test
- Your current total income is less than the full Age Pension rate
- There is nothing else you can reasonably do to improve your financial circumstances.
The maximum amount of Age Pension you can currently access under the hardship provision is $24,551.80 for singles and $37,013.60 for couples. These amounts are adjusted in March and September each year based on movements in the consumer price index (CPI). The CPI is calculated quarterly by the Australian Bureau of Statistics.
How the Age Pension assets and income tests work together
If you reach the threshold limits in both the assets and income tests, your pension will be based on the lower amount.
For example, if you are eligible for $400 per fortnight according to the assets test, and $500 per fortnight under the income test, then the $400 per fortnight test will apply.
January 2017 changes to the assets test thresholds
On 1 January 2017 the Fair and Sustainable Pensions Bill came into effect, which resulted in many pensioners losing part or all of their pensions. Two significant changes were made:
- The asset thresholds were increased. This enabled 171,500 more ‘asset poor’ Australians to either pass the assets test or have their Age Pension rate increased. Of those, 50,000 part pensioners became entitled to a full Age Pension.
- The rate at which the pension rate tapers off above the new asset thresholds was increased from $1.50 to $3 a fortnight for every $1,000 that an Age Pensioner’s asset value exceeds their limit (up to the maximum cut-off point). 236,000 Australians had their pension reduced (an average loss of $3,380 per year), and 91,300 lost their pension completely (an average loss of $4,940 per year). Those who completely lost their entitlements were automatically eligible for a Commonwealth Seniors Health Card as compensation, regardless of their income level. This card entitles holders to cheaper prescription medications under the Pharmaceutical Benefits Scheme.
The government estimated that the Bill would reduce Age Pension payments by $2.4 billion over the forward estimates (the following four years).
The bottom line
You must pass an assets test to be eligible for either a full or part Age Pension. This means that the value of your assets (excluding your family home) must be lower than threshold limits. You must also pass an income test, have reached the eligibility age and be an Australian resident to qualify for the Australian Age Pension.
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