Age Pension – not all assets are created equal!

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Your age pension entitlement can be affected by your assets, whether you own your home, which is an exempt asset (homeowner), are renting (non-homeowner), and if you are single or a member of a couple. The following table provides an overview of the current asset thresholds and limits as at November 2019.

Assets Test threshold for the full age pension

Status Homeowners – assets must be less than Non-homeowners – assets must be less than
Single $263,250 $473,750
Couple $394,500 $605,000

Assets Test upper limits

Status Homeowners – to receive a part pension, assets must be less than Non-homeowners – to receive a part pension, assets must be less than
Single $574,500 $785,00
Couple $863,500 $1,074,000

 

Here are ten things to consider when you do apply for your age pension.

1. Be aware that the value of your household contents, including your motor vehicle and personal effects, is ’fire sale’ value – not the insured value or the replacement costs. The difference in the two amounts can be substantial and can have a considerable effect on your entitlement. For example, the insured value of your home contents could be $80,000 as opposed to a fire sale value of $10,000. The difference in the two asset valuations could equate to $210 per fortnight in extra age pension just by ensuring that the fire sale valuation is used.

2. Superannuation in accumulation held in a partner’s name who is under pension age is not an asset and not assessable for the purposes of the assets test when calculating your age pension entitlement.

3. Shifting assets between partners is not seen as gifting.

4. Lifetime annuities with a nil residential capital value can be very effective in increasing a person’s entitlement under both the assets test and the income test.

5. A funeral bond up to the value of $13,250 is an exempt asset. For a couple purchasing one each, the total value for an exempt asset is $26,500.

6. Pre-paid funeral expenses and burial plots are also exempt, subject to a couple of conditions – the monies cannot be refunded, there is nothing more to pay and it is a contracted payment.

7. Your home and the – (maximum of 2 hectares) land (curtilage) surrounding your property regardless of the value are exempt from the assets test.

8. Investment properties are an asset which can be reduced by the mortgage secured against the investment property. If the mortgage is secured against your own home, it will not reduce the value of the investment property.

9. Loans to family members (children) paying no interest, which you may not see as an asset, are considered an asset according to the social security legislation. Depending on the amount of money lent, this arrangement can have a detrimental effect on your entitlement, so be very careful before you agree to lending any money to family members.

10. Selling an asset to a family member for less than what it is worth can be viewed as a gift, so again be very careful. Gifting any amounts to your children in excess of $10,000 can have a negative effect on your age pension entitlement.

 

This is certainly not a comprehensive list of considerations and pitfalls, but it is an overview of the more common issues which do arise.

Applying for an age pension when the time comes can be a very daunting proposition.

If you are in doubt about any of the questions or the information you have supplied, make sure you talk to an expert who understands the forms and what is required so that you are able to claim your maximum entitlement.

 

 

Source:  Mark Teale | Centrepoint Alliance

Age Pension – what, when and how much?

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The big question – Does paying taxes while working give you the right to expect an age pension when you decide that you want to retire? – The short answer is no.

What is the age pension?
The age pension is a safety net to support people in retirement who do not have the necessary financial resources to either fully support or partially support themselves.

When can I access the age pension? At what age does a person qualify for an age pension?
For over 100 years, the qualifying age for the age pension was 65. In 2017 the qualifying age increased by six months and will continue to increase by six months every two years until 2024, when the qualifying age will reach 67.

The following table provides a more comprehensive overview.

How do I know if I am entitled to an age pension?
This is a complicated question which is very dependent on a person’s situation. Are you single or a member of a couple, do you own your home or are you renting, how much do you have in assets and what is your income?

The current full age pension is $933.40 per fortnight for a single person or $703.50 per fortnight for each member of a couple. This full age pension is adjusted twice a year, in March and September.

The age pension entitlement is calculated under both an assets test and income test.

Why is the age pension assessed under both tests? If a person’s entitlement is less under the assets test, then what may be payable under the income test, their entitlement is determined by the assets test as this test pays the lower age pension.

In addition to a person’s age and their assets and income, a person applying for the age pension also needs to meet a residency requirement, you must be an Australian resident, and in Australia on the day the claim is lodged. You also need to have been an Australian resident for a continuous period of 10 years or have resided in Australia for a number of periods that total 10 years with at least five of these years in one continuous period.

Australia does have international social security agreements with a number of countries and residence in these countries may count towards your qualifying Australian residence.

As you can see, qualifying for the age pension is not as simple as turning a certain age. It can be complicated, and it would be advisable to talk to an expert to ensure you do receive the right entitlement when you apply.

Source: Mark Teale | Centrepoint Alliance