In Australia, 60 years old is the first retirement milestone. At this point, you can start drawing down on your superannuation (if you've quit working), and you're just seven years away from potentially receiving the Age Pension payment.
But not everyone is eligible. And if you are, the amount you can get depends heavily on your income and assets.
The asset test includes absolutely everything that you own, except the home you live in.
It applies to any home contents, personal items, vehicles, real estate or property investments, your superannuation, S&P/ASX 200 Index (ASX: XJO) shares, annuities, private trusts, and any other financial investments or assets.
You'll also need to declare any assets held outside Australia and any debts owed to you.
And that means age 60 is a crucial time to get all your ducks in a row.
The tricky thing is that the Age Pension rules, thresholds, and maximum payments are constantly changing.
And misunderstanding your limits means you could earn less, or nothing at all, when you reach age 67.
Here are six things every Australian at age 60 needs to know about the Age Pension asset test before they retire.
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1. Eligibility requirements are more than just your age
To be eligible for the Age Pension, you need to meet basic requirements ahead of the income or asset test.
That is, you need to be 67 years old (or older). You also need to be an Australian resident who has lived in Australia for at least 10 years, with at least 5 of those years in a continuous period.
2. The maximum potential Age Pension payment just increased
As of the 20th of September, the maximum fortnightly Age Pension payment increased to $1,237.70 for individuals. Couples now get a boosted $933 per person per fortnight, or $1,866 combined.
These figures include the maximum basic rate, the maximum pension supplement, and the energy supplement.
3. Asset limits for the full Age Pension differ depending on whether you're a homeowner or not, and these also just increased
As of the 20th of September, in order to receive the full Age Pension, single homeowners can own assets (including superannuation) up to a value of $333,000 (previously $321,500), and non-homeowners can own assets up to $600,000 (previously $579,500) in retirement.
But a couple has a different threshold, and it's not double the amount of one person. A couple combined can now own up to $499,000 (previously $481,500) in total if they own a property, or $766,000 (previously $739,500) if they don't.
4. You can get a part payment, and these limits just increased too
You can earn over the limits above and still earn a part Age Pension.
The cut-off point for a part-payment for single homeowners is now $745,000 (previously $733,500), and $1,012,750 (previously $1,000,500) if you're a single non-homeowner.
Couples are also entitled to a part-payment, so long as their combined assets don't exceed $1,121,000 (previously $1,102,500) for homeowners.
Non-homeowning couples can own assets totalling up to a limit of $1,388,000 (up from $1,369,500 previously).
For assets above the full pension limit, the Age Pension payment for singles or couples, regardless of whether they're homeowners or not, reduces by $3 per fortnight for every $1,000 of assets.
5. Deeming rules apply, and they've also just changed
To calculate how much income you receive from your assets, Centrelink uses what it calls a "deeming rule". Under deeming rules, instead of looking at how much your assets actually earn, it's assumed they earn a set amount of income.
As of the 20th of September, the first $66,800 of assets of single Australians have a deeming rate of 1.75%. Anything over this amount is deemed to earn 3.75%.
Couples have a 1.75% deeming rate on their first $110,600 of combined assets (this includes superannuation). Anything over this amount is deemed to earn 3.75%.
6. Gifts aren't exempt
Centrelink has strict rules around gifting money or assets to someone else to meet Age Pension eligibility.
Any gifts you make over a five-year period are counted towards your assets test for five years.
You can gift assets worth up to $10,000 in any one financial year and $30,000 over any five-year period without these assets being included in the Age Pension asset test.
