Most of us who invest in ASX shares do so with the hope that the fruits of our labour (and capital) will eventually enable us to enjoy a stream of passive ASX dividend income that can help fund a comfortable retirement.
The income we can receive from ASX dividend shares is one of the best things about investing in the stock market. However, as most Australians know, we already have a retirement safety net in this country: the Age Pension.
The Age Pension has been around for a very long time, and many Australians expect it to at least partly fund their retirement, supplemented with superannuation, of course.
However, the Age Pension is not a universally available payment. There are rules that govern who receives the pension and who is expected to pay their own way in retirement.
Obviously, owning ASX shares counts as owning assets. Owning wealth-producing assets that produce a stream of passive income may impact your ability to receive the Age Pension.
So today, let's discuss exactly how much you can earn from ASX dividend income and still get the pension.
How much ASX dividend income can you earn and still get the pension?
According to Services Australia, there are two tests one must pass to qualify for the Age Pension, assuming one is at the eligible age of 67. These tests have two cutoffs – one for the full Age Pension, and another for a 'part-pension'.
The first test is an asset test. As it currently stands, a single Australian can own up to $314,000 in assets and still qualify for the Age Pension if they own their own home. For non-homeowners, the threshold is $566,000.
For a couple, those amounts shift to $470,000 and $722,000, respectively.
The government counts almost anything of significant value as an asset here, bar the value of your primary residence (up to the first two hectares in most cases). That includes cash, business assets, valuables like vehicles, jewellery and bullion, investment property, and yes, ASX and international shares, dividend-paying or otherwise. It also includes managed funds, exchange-traded funds (ETFs) and the like.
For part-pension qualification, the single cutoffs are $697,500 for a homeowner and $947,500 for a non-homeowner. That's $1,045,500 for a homeowning couple and $1,297,500 for a couple that doesn't own their own home. If you have assets in between the two ranges, your pension payments will probably be adjusted accordingly.
So that's the asset test. But there is also an income test you must satisfy in order to receive a pension.
Receiving dividend income and the pension
Services Australia tells us that they "assess your and your partner's income from all sources" when determining pension eligibility. That includes interest from savings accounts and term deposits, superannuation, employment, any investment or business income, and dividend income from shares.
There are two income thresholds that dictate the pension income you'll receive each fortnight.
The first is $212 for single recipients. If you earn under $212 a fortnight, your pension won't be affected at all. But for every dollar you earn over $212, your pension will be docked 50 cents.
For a couple, the threshold is $372, with each dollar earned over that getting a 25-cent clip.
That continues until a complete cutoff point. For singles, that cutoff point is $2,500.80 per fortnight, and for couples, it rises to $3,822.40.
There are other factors that can impact these thresholds and amounts, including whether you and your spouse live together or apart, or whether you are in a transitional pension arrangement.
But those are the general rules.
Foolish takeaway
Of course, these are just guidelines, and you (and your spouse if applicable) should certainly speak to a financial adviser before arranging your retirement affairs.
But it is nice to know that one can own a significant portion of ASX dividend shares and still qualify for this retirement safety net.
