Eligibility for the Age Pension is based upon a number of factors and subject to both an assets and an income test. You could also be entitled to other payments and benefits, including the Pensioner Concession Card, Pension Supplement and Rent Assistance.
Maximum Age Pension rates as at 20 March 2020 are as follows:
Includes Pension Supplement and Energy Supplement. These supplements help you to meet the costs of your daily household and living expenses including energy costs.
The social security means test rules for lifetime income streams
Acknowledging the importance of lifetime income streams in retirement, the Government has introduced new Age Pension means testing rules to ensure that lifetime income streams are fairly and consistently assessed under the income and assets tests (known as the social security means tests).
The new rules are designed to support the use of certain lifetime income streams which feature payments for life, regardless of how long a person may live, and reducing access to capital over life expectancy. These new rules can provide what can be attractive means testing outcomes for retirees.
It is important to understand that the new rules only apply to an investment in a lifetime income stream made on or after 1 July 2019. The new rules do not apply to account-based pensions or term income streams (including term annuities). Also, for any lifetime income stream investment made before 1 July 2019 the current rules (known as the “deduction amount” rules) will continue to apply.
Your rate of Age Pension is calculated under both an assets test and an income test. The test resulting in the lowest rate will apply.
The level of assessable assets you own are assessed against the assets test thresholds which vary depending on your home ownership and relationship status. For every $1,000 of assets in excess of the lower threshold, your rate of Age Pension reduces by $3.00 per fortnight, reducing to zero once your assets reach the upper threshold.
This concessional assessment can be attractive compared to alternate investment structures where 100% of the asset is assessable.
Where your Age Pension is being reduced because of the assets test, an investment in a lifetime income stream could immediately improve your Age Pension eligibility.
Effective 20 March 2020, the assets thresholds are as follows:
|Lower threshold||Upper threshold
Income from various sources are assessed against the income test thresholds, which vary depending on relationship status. The way income is determined for this test depends on the nature of the income or investment.
For every dollar of income in excess of the lower threshold, your rate of Age Pension generally reduces by $0.50 per fortnight, reducing to zero once your income reaches the upper threshold.
The new rules will assess 60% of payments from lifetime income streams under the income test. For example, where a lifetime income pays an annual income of $5,000, only $3,000 will be assessed under the income test.
This may be more or less than the income derived from alternate investments but is generally seen as an attractive treatment.
Effective 20 March 2020, the income thresholds are as follows:
It is important to note that different investments or investment structures (including lifetime income streams) are treated differently under the means tests and can result in different Age Pension eligibility.
Determining whether and how much you are entitled to can be complicated. A financial adviser can help you determine your Centrelink entitlements.
Working after Age Pension age
If you choose to work past Age Pension age, there are programs in place which could make this financially beneficial.
The Work Bonus was introduced in 2009 to encourage those over Age Pension age to continue to work and to make it more financially beneficial for them to do so. Its benefits were further increased on 1 July 2019. It provides a concession for employment income for all workers after reaching Age Pension age.
Any eligible age pensioner can earn up to $300 per fortnight without it being assessed as income under the pension income test.
This doubles for couples where both are working - both parties may have the first $300 per fortnight of their own employment income not counted. For those with irregular or seasonal income, unused portions of the Work Bonus can be banked up to a maximum of $7,800 at any one time.
To be eligible for the Work Bonus, you must be over Age Pension age and receive one of the following:
- Age Pension
- Disability Support Pension
- Carer Payment
- Widow B Pension
- Bereavement Allowance
- Wife Pension
Pension Bonus Scheme
The Pension Bonus Scheme is now closed to new entrants.
Under the Pension Bonus Scheme, if you deferred claiming the Age Pension and stayed in the workforce you may have been entitled to a tax free lump sum bonus when you eventually claimed and received the Age Pension. Only one bonus was ever paid.
To be eligible for the Pension Bonus Scheme, you:
- needed to be eligible for the Age Pension;
- have not received an Age Pension or another income support payment (other than a Carer Payment) after qualifying for the Age Pension;
- meet the work test rule; and
- have registered for the scheme.
There are several diﬀerent types of concession cards so it pays to know your entitlement. The type of card you are given is determined by the Centrelink or DVA benefits which you are receiving.
The concession cards which are available are as follows:
1. Pensioner Concession Card (PCC)
PCCs are issued by Centrelink to those receiving the Age Pension, Disability Support Pension or Carer Payment. You may also be eligible for a PCC if you are over 60 years of age and have been receiving any of the following payments for at least nine months:
- Newstart Allowance
- Sickness Allowance
- Widow Allowance
- Special Benefit Partner Allowance
- Parenting Payment (partnered)
As the holder of a PCC, you are entitled to reduced cost medicines under the Pharmaceutical Benefits Scheme (PBS) and various state and territory government concessions, such as reductions on property and water rates, energy bills, motor vehicle registration and public transport.
State and territory governments and local councils oﬀer diﬀerent concessions.
You may be able to retain your PCC for a short time if you stop receiving your Centrelink payment due to commencement of paid employment.
2. Health Care Card (HCC)
If you do not qualify for a PCC, you may be entitled to an HCC if you are below Age Pension age and receive one of the following payments:
- Mobility Allowance
- Newstart Allowance
- Partner Allowance
- Special Benefit
- Widow Allowance
A HCC entitles you to the same pharmaceutical benefits as a PCC, but other concessions may vary and you may be able to retain your HCC for a short time if you stop receiving your Centrelink payment due to commencement of paid employment.
3. Commonwealth Seniors Health Card (CSHC)
Self-funded retirees who are of Age Pension age, but do not qualify for the Age Pension, may be eligible for a CSHC if their annual adjusted taxable income + deeming from certain account-based pensions is below the following thresholds:
- $55,808 (singles)
- $89,290 (couples combined)
- $111,616 (couples separated due to ill-health)
Holders of a CSHC are entitled to discounts on prescription medicines through the PBS. You might also qualify for additional health, household, transport, education and recreation concessions which may be oﬀered by state or territory and local governments and private providers.
If your pension is issued by the Department of Veterans’ Aﬀairs (DVA) then you may be entitled to a PCC, CSHC or Repatriation Health Card.
Accessing your Age Pension overseas
It is possible to get the Age Pension for the whole time you’re overseas, whether you have left Australia on a temporary or permanent basis. If you remain outside Australia for longer than 26 weeks, your pension will be reduced to a proportional rate based on your ‘Australian working life residence’. This is the number of years you have resided in Australia since age 16 to Age Pension age. If you have lived in Australia for 35 years (420 months), then you are paid the full rate of Age Pension to which you are entitled. If, for example, you have only resided in Australia for 20 years, then you will be paid 240/420 of the Age Pension (20 x 12). If you leave Australia permanently, the rate of Pension Supplement you receive will reduce on departure or, if leaving on a temporary basis, it will be reduced six weeks after departure.
However, if you returned to reside in Australia within the last two years and were transferred to or granted an Age Pension within that time, your pension will be stopped when you go overseas, unless diﬀerent provisions apply under an international social security agreement.
Disability Support Pension (DSP)
If you have been granted a DSP or transferred to the DSP less than two years ago and you go to live overseas, then your pension will be stopped, unless an international social security agreement applies to the country that you go to.
You can be paid the Disability Support Pension (DSP) for four weeks over a 12 month period while outside Australia. You may be able to receive the DSP for longer if you:
- are terminally ill and are leaving to be with family, or
- have been assessed in Australia as having no future work capacity.
However, the rate you are paid may be reduced.
You may also continue to be paid a DSP for longer than four weeks if:
- you are studying outside Australia as part of a full-time Australian course, or
- you are severely disabled and dependent on, and living with, a person who has been temporarily transferred overseas by their Australian employer.
There are diﬀerent rules which apply to other payments and these can be found on the website of Services Australia. If the country to which you are moving has an International Social Security Agreement with Australia, then you may be able to receive your payments for longer and at a diﬀerent rate. To obtain oﬃcial information about payments paid while outside Australia, we recommend that you visit www.servicesaustralia.gov.au
Additional financial assistance
Centrelink also oﬀers financial assistance packages for those who need extra support from time to time.
Pensions Loan Scheme
If you are over Age Pension age and need additional income, you can access capital tied up in your property assets under the Pension Loans Scheme.
The Pensions Loans Scheme is a voluntary arrangement which provides support in the form of a loan provided by Centrelink or DVA, for a short or indefinite period. It is paid in regular fortnightly installments.
An Advance Payment is a lump sum payment of some of your future pension entitlement and you will be required to pay it back.
As a single aged pensioner, you can request one, two or three Advance Payments during a six-month period, as long as the total amount falls within the minimum and maximum amount.
As of 20 March 2020, these amounts are $446.40 and $1,339.20 respectively. (For each member of a couple the amounts are $336.50 and $1,009.50). This amount is then repaid from your following 13 fortnightly payments. Centrelink will only advance you an amount which it deems will not cause you financial hardship in making the repayments.
Financial Information Services
Centrelink provides a Financial Information Service which enables you to discuss your finances, how to control your debt, which payments may be available to you and how to make informed financial decisions.
You can make an appointment to speak to a Financial Information Services Oﬃcer (FISO) at any time; you do not need to be a current Centrelink customer. To make an appointment, call 13 2300.
Rent Assistance is paid to those in receipt of an income support payment, who pay private rent. Those who rent from a housing authority will not be eligible.
Rent Assistance rates if you do not have dependent children
||Maximum payment per fortnight
||Maximum payment is paid if your fortnightly rent is more than
||No payment if your fortnightly rent is less than
| Single, sharer
|One of a couple who are separated due to illness
|One of a couple who are temporarily separated
How the new means test rules improved Age Pension outcomes for Wayne and Wendy
Wayne and Wendy are a 66-year-old couple who look a lot like many Australian retirees.
They own a well-maintained home in a nice suburb in an Australian city. They have scrimped and saved through their working lives to accumulate $300,000 each in super (which they had originally planned to convert into account-based pensions via their super funds). They also have $50,000 in bank savings and their non-financial assets (including cars and contents) are valued at $40,000.
They are currently entitled to a part Age Pension of $13,964.60 p.a. (based upon their level of assets). However, Wayne and Wendy’s adviser has recommended a combination of income streams for their retirement, including a lifetime income stream (a lifetime annuity in this case) with 25% of their retirement savings to provide guaranteed income for life, no matter how long they both live or how investment markets perform.
In this case their Age Pension in the first year will be $18,644.60 p.a. (an increase of $4,680 in the first year). Wayne and Wendy’s adviser has also modelled the effect of this assessment in later years as this relative benefit changes over time as their other assets fluctuate in value.
To find out more about the changes to the means testing of lifetime income streams, and potential impacts on your personal circumstances, contact your financial adviser.