Australians aged 67 years or older are eligible for a fortnightly Age Pension payment to help fund basic living expenses in retirement.
The Age Pension, which is paid by Centrelink, is an important safety net that ensures that older Australians are able to meet basic living requirements, regardless of the amount of savings, income, assets, or superannuation they own.
The catch is that it isn't available to everyone. Your eligibility is subject to several key criteria, including your age, residency, and an income and asset test.
The problem is that while many understand that their income could affect the payment they receive, many overlook asset limits.
Here's a breakdown of everything you need to know about the Age Pension and the asset test.
Image source: Getty Images
The maximum Age Pension payment
The Age Pension is paid on a fortnightly basis up to a maximum total payment of $1,200.90 per fortnight for singles and $1,810.40 for couples combined.
These sums include the maximum basic rate, the maximum pension supplement, and the energy supplement.
As I mentioned above, the final amount you'll receive (if anything) is heavily dependent on Centerlink's income and asset test.
What is the Age Pension asset test?
Then an asset test includes any stocks, like S&P/ASX 200 Index (ASX: XJO) shares, property, or possessions you own in full, in part, or have an interest in. This includes assets held outside Australia and any debts owed to you. It generally excludes the home you live in.
Note, however, that Centrelink assesses you under both tests and applies what it calls the 'lower rule of two'.
This means your potential fortnightly Age Pension is calculated under both tests. The one that results in the lower payment is the amount you will actually receive.
What are the asset test limits?
In order to receive the full Age Pension, single homeowners can own assets (including superannuation) up to a value of $333,000. For single non-homeowners, this will be up to $600,000 in retirement.
But a couple has a different threshold, and it's not double the amount of one person. From the 1st of July, a couple combined can own up to $499,000 in total if they own a property, or $766,000 if they don't.
How are assets calculated?
In order to determine how much income you make from your assets, Centrelink uses a deeming rule.
Deeming assumes your financial assets earn a fixed, set rate of income, regardless of what they actually earn.
This assumed income is then added to your other income to determine your Age Pension rate.
For single Australians, the first $66,800 of their financial assets has a deemed rate of 1.25%. Everything over that is deemed to earn 3.25% interest.
Couples will have a 1.25% deeming rate on their first $110,600 of combined financial assets (this includes superannuation). Anything over $110,600 is deemed to earn 3.25%.
What if I own over that threshold?
If your assets are over the limit explained above, it's still possible to receive a part Age Pension payment
From the 1st of July, the cut-off point for single homeowners is $733,500, and $1,000,500 if you're single and a non-homeowner. If your assets come in above the initial limits but below these thresholds, you're still entitled to some level of payment.
Couples are also entitled to a part-payment, so long as their combined assets don't exceed $1,102,500 for homeowners. Non-homeowners can own assets totalling up to a limit of $1,369,500.
