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Five ways to reduce your client’s assessable assets for the Age Pension means test

For financial adviser use only

Although both income and assets tests are material in determining Age Pension entitlements, it may be in your client’s interests to explore suitable strategies to bring their assessable assets below the relevant cut-off threshold. Here are five options for clients to consider for reducing their assessable assets to become eligible, or increase their Age Pension payment rate.

When working out your client’s Age Pension entitlement, they will need to be eligible under both income and assets tests. These tests will determine the rate of Age Pension each client receives, and it is usually the test resulting in the lowest rate that applies. The assets test looks at the type and value of assets owned in Australia and overseas. This generally includes real estate assets (except for the principal home which is exempt), business assets and financial assets such as savings or investments. Possessions, such as cars, boats and other vehicles, computers and jewellery are also assessed at their market value.

Many clients who are trying to access the Age Pension will qualify for a part pension under the assets test or have assessable assets that exceed the relevant assets test cut-off threshold. This being the case, it’s worth knowing how clients might go about reducing their assets without limiting future opportunities to generate income, or be left without savings to draw on for planned or unforeseen expenses.

 44654 Age Pension Icons 80x80 R1-10Gifting

Giving away assets to family members can be one way to reduce assessable assets. However, clients need to be aware of the impact of such a gift on their Centrelink payments. Centrelink and Department of Veterans Affairs (DVA) both define gifting as a person destroying or diminishing the value of an asset, income, or a source of income, and without receiving adequate financial consideration in return for the asset or income.

When the gift is made from a client’s assets, there are two limits to be aware of:

  • $10,000 annual limit – applies to assets gifted during a financial year, and
  • $30,000 five-year limit – applies to assets gifted over the last five financial years including the current financial year.

An amount gifted above these thresholds is treated as a deprived asset. This means it will continue to be counted as an assessable asset and will be subject to deeming under the income test by Centrelink/DVA for five years from the date of the relevant gift. These limits apply to singles and a couple as a whole. However, spouses can gift to each other without triggering these deprivation provisions.
Clients should also be aware of the difference between a gift and a loan1. As with a gift, a loan is also treated as a financial asset subject to deeming. However, the loan is assessed until it is repaid whereas deprived assets will no longer be assessed after five years from the date of the gift. It is essential to inform Centrelink of the type of arrangement to ensure the intended assessment will apply.

44654 Age Pension Icons 80x80 R1-11Home renovation or upgrades

To reduce their assessable assets, clients can bring forward certain expenses which they have planned for in the future. As the principal home is an exempt asset, any increase in the value, or a renovation, of their home will also be exempt. This can be a way to invest in enhancing the value of an existing asset that is exempt from the assets test. Bringing forward other spending, such as travel or buying a new car – a depreciating asset – could reduce savings for the purposes of the assets test, but can also deplete retirement assets, and income from those assets, overall.

44654 Age Pension Icons 80x80 R1-12Other exempt investments

Prepaid funeral expenses2 or buying a burial plot, irrespective of their value, are both exempt from Age Pension assessment. Funeral bond or funeral fund purchases are exempt to a value of $13,5003 and this applies to a client who is single, or to each member of a couple providing each has made a separate investment.

44654 Age Pension Icons 80x80 R1-13Super contributions to a spouse

Super savings in the accumulation phase for someone under Age Pension age are exempt from the assets test. So for couples where one has reached Age Pension age, it can effectively reduce their assessable assets if the older member of the couple withdraws their super and recontributes this amount into the younger member’s super accumulation account, subject to cap limits on their personal contributions. This could lead to an immediate benefit in the Age Pension eligibility or payment rate for the older member of the couple.

44654 Age Pension Icons 80x80 R1-14Lifetime income stream

Generally, lifetime income stream products that meet the declining capital access schedule have only 60% of the purchase price assessed under the assets test until the day a client turns 84, or for a minimum of five years. After this, the assessment reduces to 30% of the purchase amount for the rest of the person’s life. For example, where an assets test sensitive client invests $100,000 in a lifetime income stream, assessable assets immediately reduce by $40,000 (where just 60% or $60,000 is assessable). This reduction in assessable assets can have the immediate effect of increasing the Age Pension by $3,120 (40 x $78 p.a.) or 3.12% in the first year.

In addition to enhancing Age Pension outcomes, lifetime income streams can help guarantee a regular income for your clients’ lifetime regardless of how investment markets perform or how long they live. They can also provide an additional source of income to ensure a client is not relying only on the Age Pension to meet living expenses, particularly their essential expenses, such as utility bills and groceries.
Structuring a clients’ assets to access additional income through Age Pension payments can help reduce their need to draw on other retirement assets, optimising their longer-term financial planning outcomes and providing peace of mind in retirement.

For more information on how to help your clients improve their Age Pension and retirement income outcomes, click here.


1 To be a loan there must be an actual lending of money or an asset of a particular value, and a clear intention to repay.
2 The amount of an advance payment made by an income support recipient for themselves or their partner’s funeral service (a pre-paid funeral) is
an exempt asset if:
– it is a contracted payment, and;
– nothing further needs to be done for funeral services to be provided in accordance with the contract, and;
– the payment cannot be refunded, unless the income support recipient moves outside the designated funeral service area.
3 As at 1 July 2020 and indexed annually.