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In March, July and September of each year, the federal government changes the rules for claiming the Age Pension… usually for the better! Currently, the Age Pension income test thresholds and the Age Pension assets test thresholds are adjusted three times a year in line with increases in the Consumer Price Index.
Effective from 1 July 2018, the income test and assets test thresholds have been increased, in line with CPI increases. The increase in the Age Pension income test thresholds, mean eligible Australians can earn more income and still be eligible for a FULL or PART Age Pension. The increase in the Age Pension assets test thresholds, mean eligible Australians can own more assets and still be eligible for a FULL or PART Age Pension. See later in the article for the details.
Background on January 2017 changes: Note that the Age Pension assets test became much stricter from 1 January 2017 for those Australians seeking a PART Age Pension, which means that many Australians are still grappling with a recent cut in Age Pension entitlements. The January 2017 assets test changes, meant hundreds of thousands of Australians lost some, or all, Age Pension entitlements (for information on these harsher changes, see SuperGuide article Age Pension: 300,000 Australians lost entitlements on 1 January 2017. Since January 2017 however, the regular indexation of Age Pension income and assets test thresholds means that more Australians have become eligible for the Age Pension, or eligible for a greater entitlement.
Note: Age Pension rates increased, effective from 20 March 2018 (and applicable until 19 September 2018). A single person receiving a FULL Age Pension, can expect to receive $907.60 (including Pension Supplement and Energy Supplement) a fortnight, while a couple receiving a FULL Age Pension can expect to receive $1368.20 (combined) a fortnight, including Pension Supplement and Energy Supplement (for more information on the latest rates, see more detail later in this article, or see SuperGuide article Latest Age Pension rates (since March 2018)).
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 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. You must also satisfy a residency test. For more information on how the Age Pension rules work and the steps involved when claiming the Age Pension, see SuperGuide article Australian Age Pension: Am I eligible and how do I apply?
Continue reading to learn more about the following:
- Latest Age Pension rates
- Increase in the Age Pension assets test thresholds
- Increase in the Age Pension income test thresholds
Age Pension rates (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 Total Average Weekly Earnings (MTAWE) 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).
A single person eligible for the FULL Age Pension can expect an annual Age Pension income (including Pension Supplement and Energy Supplement) of around $23,598.
A couple eligible for the FULL Age Pension can expect combined annual Age Pension entitlements (including Pension Supplement and Energy Supplement) of around $35,573.
You can find the latest Age Pension rates in the SuperGuide article Latest Age Pension rates (since March 2018).
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 (and a one-off adjustment was also made to the assets test thresholds on 1 January 2017).
FULL Age Pension and the assets test: From 1 July 2018, a single home-owner can own up to $258,500 in assets (excluding the home) and still receive a FULL Age Pension. A home-owning couple can own up to $387,500 and receive a FULL Age Pension. The lower assets test threshold, for the FULL Age Pension, will be updated again from 1 July 2019. Since 1 July 2017 until 30 June 2018, a single home-owner can own up to $253,750 in assets (excluding the home) and still receive a FULL Age Pension. A home-owning couple can own up to $380,500 and receive a FULL Age Pension.
The UPPER threshold is the limit that determines an individual’s eligibility to a PART Age Pension. The assets test UPPER threshold, is adjusted on 1 July of each year, and is also adjusted in March and September of each year (and a one-off adjustment was also made to the assets test thresholds on 1 January 2017). The UPPER threshold of the Age Pension assets test is adjusted 3 times a year, rather than once a year, due to the six-monthly changes in the Age Pension rate.
Part Age Pension and the assets test: From 1 July 2018, a single home-owner can have $561,250 in assets (excluding their home) before they lose their small PART Age Pension entitlement. From 1 July 2018, a home-owning couple can have $844,000 in assets (excluding their home) before they lose their small PART Age Pension entitlement. Since 20 March 2018 until 30 June 2018, a single home-owner can have $556,500 in assets (excluding their home) before they lose their small PART Age Pension entitlement. Since 20 March 2018 until 30 June 2018, a home-owning couple can have $837,000 in assets (excluding their home) before they lose their small PART Age Pension entitlement.
Background to the more generous pre-January 2017 assets test thresholds: Note that the assets test was more generous before January 2017. Until 31 December 2016, a SINGLE home-owner could have more than $790,000 in assets (excluding their home) and still be eligible for a small PART Age Pension – the Age Pension cut out when a single home-owner held $793,750 in assets (excluding their home). On 1 January 2017 however, the UPPER threshold of the Age Pension assets test for a home-owning single person dropped to $542,500, due to the introduction of the harsher assets test. Until 31 December 2016, home-owning COUPLES could have more than $1.17 million in assets (excluding the home) and still claim a small PART Age Pension – the Age Pension cut out when a home-owning couple held $1,178,500 in assets. On 1 January 2017 however, the UPPER threshold of the Age Pension assets test for a home-owning couple dropped to $816,000, due to the introduction of the harsher assets test. The UPPER assets test threshold has been indexed 5 times since January 2017
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 from July 2018.
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.
FULL Age Pension and the income test: From 1 July 2018, a single person can earn $172 a fortnight (or the equivalent of $4,472 a year), before having the FULL Age Pension entitlement reduced, while a couple can earn $304 a fortnight (or the equivalent of $7,904 a year) before having the FULL Age Pension entitlement reduced. The lower income test threshold, for the FULL Age Pension, will be updated again from 1 July 2019. From 1 July 2017 until 30 June 2018, a single person can earn $168 a fortnight (or the equivalent of $4,368 a year), before having the FULL Age Pension entitlement reduced, while a couple can earn $300 a fortnight (or the equivalent of $7,800 a year) before having the FULL Age Pension entitlement reduced.
The income test UPPER threshold is also adjusted on 1 July of each year, and further adjustments are made in March and September of each year. The UPPER threshold is the limit that determines an individual’s eligibility to a PART Age Pension. The UPPER threshold of the Age Pension income test is also adjusted in March and September, due to the six-monthly changes in the Age Pension rate.
PART Age Pension and the income test: From 1 July 2018, the income test UPPER threshold increases by $4.00 per fortnight (roughly $104 a year) for singles, and $4.00 per fortnight (roughly $104 a year), for couples. What this means is that a single person can earn $1,987.20 a fortnight (the equivalent of around $51,667 a year, although assessed fortnightly), while a couple (combined) can earn $3,040.40 a fortnight (the equivalent of roughly $79,050 a year), before they lose the entitlement to a PART Age Pension. From 20 March 2018 until 30 June 2018, a single person can earn $1,983.20 a fortnight (the equivalent of around $51,563 a year, although assessed fortnightly), while a couple (combined) can earn $3,036.40 a fortnight (the equivalent of roughly $78,946 a year), before they lose the entitlement to a PART Age Pension.
You can find the latest income test thresholds, including Transitional Age Pension income test thresholds, for the FULL or PART Age Pension, in the SuperGuide article: Age Pension: Income test thresholds applicable from July 2018.
More information on Age Pension changes
For more information on the Age Pension changes, see the following SuperGuide articles:
- Australian Age Pension: 10 important facts you should know
- Latest Age Pension rates (since March 2018)
- Australian Age Pension: Am I eligible and how do I apply?
- Age Pension: Assets test thresholds applicable from July 2018
- Age Pension: Income test thresholds applicable from July 2018
- Age Pension: Are you eligible for the Work Bonus?
- Age Pension income test: Deeming rates and deeming thresholds
- Less Age Pension, and paid to fewer Australians since January 2017
Note: You can also check out our special SuperGuide articles, if you’re seeking information on any of the following:
- Changes to the Age Pension assets test, which took effect from 1 January 2017, see SuperGuide articles Age Pension: 300,000 Australians lost entitlements on 1 January 2017 and Done deal! Lost Age Pension, got new Seniors Health Card.
- Changes to the Age Pension income test which took effect from 1 January 2015, see SuperGuide article Income test changes (January 2015) mean less Age Pension forever.
- Summary of the changes to the Age Pension affecting defined benefit pensions that took effect from 1 January 2016, see SuperGuide article Age Pension income test change hits funded defined benefit pensions.
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Glad to see that the full coupes pension is increasing because we’ve been reducing our super assets progressively. It’s been good in a way, because we’ve doing things we would never have done without Mr Morrison’s help. That $175 per week he confiscated from us will soon be forgotten, but it’s a pity he didn’t take a couple of hundred a week off retired pollies and the zillions of retired public servants on defined benefit pensions as well, but it’s different rules for them. Needless to say we’ll be absent at the next election, and we wont be the only ones.
I do not really understand your thinking. Perhaps be grateful for the assets you have and the changes which have enabled you to enjoy life in an unexpected ways. Australians have one of the most generous pension and superannuations schemes in the world. And not all public servants are more advantaged than the rest, and the pension changes affect most of them anyway.
Politicians keep telling us that paying us an aged pension isn’t sustainable. Paying politicians all the perks they get is even less sustainable!
The politicians themselves, in Canberra, brought it up, that the Age of Entitlements is over:
Proposals to make politicians shoulder their share of the weight now that the Age of Entitlement is over:
1. Scrap political pensions.
Politicians can purchase their own retirement plan, just as most other working Australians are expected to do.
2. Retired politicians (past, present & future) participate in Centrelink.
A Politician collects a substantial salary while in office but should receive no salary when they’re out of office.
Terminated politicians under 70 can go get a job or apply for Centrelink unemployment benefits like ordinary Australians.
3. Funds already allocated to the Politicians’ retirement fund be returned immediately to Consolidated Revenue.
This money is to be used to pay down debt they created which they expect us and our grandchildren to repay for them.
4. Politicians will no longer vote themselves a pay raise.
Politicians pay will rise by the lower of, either the CPI or 3%.
5. Politicians lose their privileged health care system and participate in the same health care system as ordinary Australian people.
i.e. Politicians either pay for private cover from their own funds or accept ordinary Medicare.
6. All contracts with past and present Politicians men/women are void effective at the next election.
The Australian people did not agree to provide perks to Politicians, that burden was thrust upon them. Politicians devised all these contracts to benefit themselves. Any perks most ordinary workers have cease when they leave their employment, the same should apply to Politicians.
Serving in Parliament is an honour not a career.
The Founding Fathers envisioned citizen legislators, so our politicians should serve their term(s), then go home and back to work.
THIS IS HOW YOU FIX Parliament and help bring fairness back into this country! But it will never happen because politician’s won’t let it.
I agree whole heartly to ALL of above,Have for years. We are expected to toe the line & TAKE CARE
of ourselves It is high time the POLITICIANS did the same, have they not heard of the word SHARE!!
YES bring FAIRNESS back into the Country POITICIANS LET IT HAPPEN PLEASE!!
Hi Karen
You are spot on, just remember what happened to Mark Latham.
Mr Latham wanted to bring the politicians’ super into line with what the average worker was getting, 9%; not the 12% they were already getting.
Luckily for all of us, Mr Latham stopped John Howard from including our Pharmaceutical benefits scheme into the USA Free Trade agreement which would have destroyed our PBS.
I am not a Mark Latham fan; not a fan of any politician…..just stating the facts as I recall them.
Remember what happened to Mr Latham ??? He was knifed in the back by the gutless media and by his own Labor party goons.
Recently the Greens supported the LNP for a bigger Australia and more immigration……go figure.
Seeing that almost all politicians hate Pauline Hanson; maybe she will do a better job ?? Who knows……could not be worse than the pack of self serving, corrupt clowns we have now.
Karen, I would also add that we must reconsider/reduce the extremely generous Defined Benefit Pensions currently being paid to retired public servants. The country simply cannot afford these CPI increased pensions.
The irony is, that these senior public servants were/are the ones telling us how to manage our super funds and placing caps and limits on SMSF as they saw fit, whilst they continue to suck on the teat of the taxpayer until they and their partners death.
These retired public serpents live on taxpayer secure indexed pensions without the worry of market corrections or constant changes to the superannuation system…….what a bunch of scum sucking hipocrites !!
Time for my medicine now, my blood is boiling.
Ah !!…….Australia the land “dumb” under !!
The extremely generous defined benefit pensions paid to most older public servants are often less than the OAP for a married couple – unlike the OAP they have been indexed to CPI, not to the more generous Male earnings or the pensioner index. They form part of those people’s superannuation – they earned the money as part of their package – just like others earned the 9% super they received If you thought their package, including their super, was too generous you should have complained about it at the time they were earning it; they might have pointed out how equivalent private sector managers, were enjoying much higher salaries, unlimited use of company cars (and mobile phones when they came along) and many other tax minimizing fringe benefits. Another important difference now is that the defined benefit scheme pensions are are taxed whereas other people’s super is not after 60. How would private sector retirees feel if someone decided their 9% was too generous and so some of it should be handed over to the government? The trouble is people try and compare the defined benefit superannuation pensioners with the OAP – the former are not welfare recipients they are self-funded retirees, who generally paid far more of their fair share of the taxes that pay for those that did not plan for their retirement.
Thank you Petrus for correcting Shylock’s misinformation and misunderstanding of the government Defined Benefit Pensions.
Yes, we are self-funded retirees. May I just add that the DB schemes under CSS and PSS were compulsory. All government employees were obliged to make personal after tax contributions of between 2% and 10% of their salary. We could not opt out.
The government on the other hand did not actually put their 9% contribution into our super accounts. Rather the government funds the DB pensions from untaxed general revenue, so that is why we DB pensioners pay tax on our Super pensions even after age 60.
Yes, I very much appreciate receiving a super pension that is not vulnerable to market fluctuations, but in my case I receive little more than what I would get in the OAP – which also does not move with market fluctuations. As Petrus points out, the OAP increases more generously each year that the DB pensions do.
I do think it’s a bit much to call us “a bunch of scum sucking hipocrites (sic)”. We were just lucky to be employed in situations where making personal after-tax contributions to super was compulsory. It forced us to save for our retirement.
Absolutely spot on. How can this be presented to the entire Australian population. I would be prepared to do anything I could to facilitate this.
So many on this page suffering from the “them and us” disease. It is so inward looking and unhelpful.
That’s right Karen, the politicians won’t let it because greed is their motivating factor until they receive their big pension payments after retiring from politics!
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
Hi Shylock,
That strategy you outline seems great. My question is how can this be tax free? Wont they be expected to pay tax on anything over the $18,000 tax free threshold on earnings every year? How does that work?
Hi Surfer D
You are correct.
Sorry I neglected to say tax free from age 60.
The couple in question income split and had lots of franking credits but still had to pay some tax.
Every case is different and you need to speak with a financial planner.
My ‘rant’ was just that because I cannot provide financial advice but I was just retelling a story of a friend who used some common sense.
Cheers
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.