What is the Age Pension Assets Test?

A lot of changes have been made to the Age Pension assets test over the last year or so; here’s our guide to the test including thresholds, what is included and what is exempt.

The Age Pension assets test is one of four criteria that Centrelink uses to determine your eligibility for the Age Pension: the other three being age, residence and income requirements.

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An asset is essentially anything you own which has monetary value and can be converted into cash – whether it’s a liquid or illiquid asset is irrelevant for the purposes of the asset test. That being said, certain assets and asset classes are excluded from assessment in the asset test. The value of each individual asset is calculated by determining what it would sell for at current market value, minus any debt it has secured against it. Centrelink adds up the value of your assets and if the total value is below the threshold for your circumstances, you will have passed the assets part of the test.

What are the age pension assets test thresholds?

At time of writing, these are the various thresholds for age pension eligibility.

Allowable amount asset test threshold
Homeowners Non-homeowners
Single $253,750 $456,750
‘Couple Combined’ (Couple living together) $380,500 $583,500
Couple separated due to ill health $380,500 $583,500
Couple where only one partner is eligible for Age Pension $380,500 $583,500
Source:  Department of Human Services, February 2018

There are higher threshold limits that apply to those receiving a part-pension or transitional Age Pension (TTR pension).

If the assessment of your assets reduces your Age Pension payment so much that you are in severe financial hardship, you can make a claim for Asset Hardship consideration. You could also apply for a loan under the Pension Loans Scheme.

Now let’s look at what can count towards your assets.

What does the Age Pension assets test look at?

The Age Pension assets test will take the following assets and asset classes into consideration:

Real estate

Any real estate or property which is not your principal home will be assessed under the Age Pension assets test. This may include part-owned property, property owned as part of a business structure, or property used mainly for business purposes; your principal home is not exempt from the assets test if you use it mainly for business.

Granny flat interests

If you transfer cash or other assets to someone for the privilege of living in a home you don’t legally own, the value of what you transferred will be assessed against the value of the home in question (known as a granny flat) in order to determine whether you are considered to be a homeowner or not. The rules surrounding granny flat interests are slightly more complex and are laid out here.

Retirement village contributions

If you live in a retirement village, the size of the entry fee you paid will determine whether you are considered a homeowner or not. This in turn will determine whether your entry fee (which can be upwards of $200,000) is assessed as part of the assets test. Read more about how retirement village living affects your real estate assets here.

Life interests

Similar to a granny flat interest, if you do not own a certain asset but have a life interest in it or receive a lifetime income from it, it may be assessed as part of the assets test. Life interests are usually based in real estate.

Financial investments

Any financial investments you hold will be assessed as part of the assets test. These include:

  • Account-based investments such as:
    • any bank, building society, or credit union accounts you have open
    • cash
    • term deposits
    • public and private loans
  • Market-linked investments such as:
    • managed investments
    • shares and securities
    • bonds, notes and debentures
    • gold, silver or platinum bullion
    • superannuation for those above the pension age
  • Certain income streams, specifically:
    • all account-based income streams purchased from 1 January 2015, and certain ones purchased before then
    • short-term income streams

Income streams and account-based investments are valued using their current balance, whereas market-linked investments are valued using their net market value – e.g. the last trade/sale price of said investment, minus any debt or loan secured against it.

Superannuation investments

Your superannuation investments are not counted in the assets test if you are below Age Pension age; if you’re above the Age Pension age, your superannuation investments are counted regardless of whether you receive the Age Pension or not.

However, if your superannuation fund is paying you a pension, that may be counted in the assets test as an income stream.

The following table contains details of the superannuation funds rated by Canstar, sorted by three-year performance (highest to lowest)

Please note that the performance information shown in the table is for the investment option used by Canstar in rating of the superannuation product.

Canstar considers the annual investment returns of a product’s default investment option, including default life-stage options. Where a product does not have a default investment option, annual returns for the investment option with the highest FUM and a 60-80% growth asset allocation are used.

Income streams

There are two broad categories of income streams: those received as a pension from a superannuation fund and allocated or account-based annuities, which are an income stream purchased from a life company.

Income streams purchased before 20 September 2004 are not counted in the assets test; if an income stream was purchased after 20 September but before 20 September 2007 half of its value is counted in the assets test. Any income streams purchased on or after September 2007 have their full value counted in the assets test.

If an income stream is not fully exempt from the assets test, it is either:

  • Partly exempt from the assets test
  • Asset tested long term
    • Has a term of five years or more, or less than five years if the term is equal to your life expectancy
    • Is valued using either its account balance in the case of account-based or market-linked income streams, or its purchase price
  • Asset tested short term
    • Is valued using its purchase price, but every six or 12 months any capital returns received are deducted

Business assets

Any business that you are involved in as a partner or sole trader will be examined in order to determine how much of its income and/or assets belong to you, if any.

Additionally, if you are determined to be the controller of a private trust or company, its income and assets will be included in the assets test.

Funeral investments

Certain types of funeral bonds are counted as financial investments and as such are not exempt from the assets test. The value of up to two bonds will be exempt from the assets test if:

  • Their holder doesn’t also have prepaid funeral expenses
  • The amount invested in them is under the Funeral Bond Allowable Limit ($12,750 as of 1 July 2017)

If both of these requirements are not met, your funeral bonds will not be exempt, meaning your share of its current value and interest will be counted in the test, along with any deemed income received from the investment.

If you have several (more than two) bonds, you can choose which one(s) you want to be exempt from the assets test.

Assets given away

You and/or your partner may choose to give away or gift assets/sources of income, but they may still be counted under the assets test depending on their value.

For the purposes of the assets test, gifting is where you either give assets away or deliberately transfer them for less than their market value. Any gifts you have made in the last five years may count under the assets test. There is a dollar limit to how much you (or you and your spouse) can gift in a certain period, which is referred to as the ‘allowable gifting amount’. The allowable gifting amount is:

  • $10,000 in one financial year
  • $30,000 in a five-year period – this can’t include more than $10,000 in any year

If this amount is exceeded, the gift(s) which exceed the allowable gifting amount will count in your assets test for the next five years, unless the gifts in question are returned.

Other assets

Other assets included in the assets test include:

  • motor vehicles
  • boats
  • caravans
  • licences, such as fishing or taxi
  • the surrender value of life insurance policies
  • trading, hobby or investment collections
  • cryptocurrency such as Bitcoins
  • household contents
  • personal items

What assets are exempt from the Age Pension assets test?

The full list of assets that are exempt from the assets test is rather extensive, but here are some of the more commonplace exemptions:

  • Your principal home and up to two hectares of used land on the same title (anything over two hectares is counted in the assets test)
  • Certain income streams (as detailed above)
  • Any superannuation account/investments from which a pension is not being paid – this exemption is valid until pension age is reached

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  • Any property or money left to you as part of an estate which you can’t access for up to 12 months
  • Disability aids
  • Payments received by people with disability from the National Disability Insurance Scheme.

Also exempt are most insurance payments made to compensate for damage to or loss of property.

Asset Hardship Provisions

Asset Hardship Provisions allow for the asset requirements to be circumvented due to financial hardship in situations where the individual in question would otherwise be eligible for a payment.

Financial hardship for those not eligible for a payment

You may currently have little or no entitlement to a payment, but according to Centrelink you may be considered to be going through severe financial hardship if:

  • Your total income including, any payment paid under the assets test is less than the maximum rate of that payment
  • Your readily available funds are less than the allowable limit, and
  • There is no other course of action which you could be expected to take to improve your financial position

Financial hardship for those eligible for a pension

If you are currently eligible for or receiving a pension, Centrelink may consider you to be going through financial hardship if:

  • Your pension is reduced or not payable because of the assets test
  • You own an asset which you cannot sell or be reasonably expected to sell
  • You cannot borrow against the asset or be reasonably expected to borrow against the asset
  • You would otherwise qualify for a payment under the income test
  • The gifting rules do not apply or can be disregarded.

Financial hardship for those eligible for an allowance or benefit

If you are currently eligible for or receiving an allowance or benefit rather than a pension, Centrelink may consider you to be going through financial hardship if:

  • Your allowance or benefit is not payable because of the assets test
  • You own an asset which you cannot sell
  • You cannot borrow against the asset
  • The asset is on the market to be sold at a realistic price
  • You are unable to qualify for any other Australian Government assistance
  • You would otherwise qualify for payment under the income test
  • The gifting rules do not apply or can be disregarded.

At time of writing, the maximum Age Pension payment available over a year to those who have applied for a payment due to financial hardship is $23,254.40 for a single and $35,058.40 for a combined couple.

How to apply for a pension payment due to financial hardship

In order to apply for a payment under Asset Hardship Provisions, you will be required to complete a ‘Claim for consideration under hardship provisions’ form, which you can acquire a copy of by calling 132 300 and speaking to a Financial Information Service officer.

If a couple is applying for payment under the hardship provisions, two separate claims must be lodged; however this can be done by completing a single claim form which provides the details of both partners. Each partner can also complete a separate form.

One of the easiest ways to avoid financial hardship later in life is making sure you’ve set yourself up for a comfortable and well-funded retirement via superannuation; but it’s important to find the fund that’s best for you. You can compare different super funds with Canstar.

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