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When can you access the age pension — if at all?

By Mark Teale
04 December 2019 — 4 minute read

Does paying taxes while you’re working give you the right to expect you will receive an age pension when you decide that you no longer want to work and retire? The short answer is no.

Today’s age pension is a safety net to support people in retirement who do not have the necessary financial resources to either fully support or partially support themselves.

Assuming you are entitled to receive the age pension, do you know at what age you would qualify?

For over 100 years, the qualifying age for the age pension was 65. In 2017, the qualifying age increased by six months and will continue to increase by six months every two years until 2024, when the qualifying age will reach 67, as shown below.

Taking myself an example, I was born on 20 August 1956. The relevant qualifying age when I might be able to access the age pension is 66.5, which will be on 20 February 2023.

However, age alone doesn’t entitle you to the age pension.

How do you know if you are entitled to an age pension?

This is a complicated question which is very dependent on your situation — are you single or a member of a couple? Do you own your home or are you renting? How much do you have in assets and what is your income?

The current full age pension is $933.40 per fortnight for a single person or $703.50 per fortnight for each member of a couple. This full age pension is adjusted twice a year, in March and September.

A person’s entitlement to the full pension is dependent on their assets, the income generated from these assets and if they do happen to be still working.

The age pension entitlement is calculated under both an assets test and an income test. If a person’s entitlement is less under the assets test, than what may be payable under the income test, their entitlement is determined by the assets test as this test pays the lower age pension.

The following table provides an overview of the current asset thresholds and limits as at November 2019.

Assets test threshold for the full age pension

Status     Home owners - assets must be less than         Non-home owners - assets must be less than

Single    $263,250                                                               $473,750

Couple   $394,500                                                               $605,000

Assets test upper limits to receive a part pension

Status     Home owners - assets must be less than            Non-home owners - assets must be less than

Single    $574,500                                                               $785,00

Couple   $863,500                                                               $1,074,000

In addition to a person’s age, their assets and income, a person applying for the age pension also needs to meet a residency requirement. You must be an Australian resident, and in Australia on the day the claim is lodged. You also need to have been an Australian resident for a continuous period of 10 years or have resided in Australia for a number of periods that total 10 years, with at least five of these years in one continuous period.

Australia does have international social security agreements with a number of countries and residence in these countries may count towards your qualifying Australian residence.

Qualifying for the age pension is not as simple as turning a certain age. The application itself is 25 pages long and asks a total of 89 questions. In addition to this form, you will also be required to complete an Income and Assets questionnaire, another 17 pages and a further 55 questions!

10 things to consider when applying for the age pension

  1. Be aware that the value of your household contents, including your motor vehicle and personal effects, is “fire sale” value — not the insured value or the replacement costs. The difference in the two amounts can be substantial and can have a considerable effect on your entitlement. For example, the insured value of your home contents could be $80,000 as opposed to a fire sale value of $10,000. The difference in the two asset valuations could equate to $210 per fortnight in extra age pension just by ensuring that the fire sale valuation is used.
  2. If you have a partner who is below age pension age and is still accumulating superannuation, this is not an asset and not assessable for the purposes of the assets test when calculating your age pension entitlement. Shifting assets between partners is not seen as gifting and this can be an effective way to minimise your assessable assets.

  3. Lifetime annuities with a nil residential capital value can be very effective in increasing a person’s entitlement under both the assets test and the income test.

  4. A funeral bond up to the value of $13,250 is an exempt asset. For a couple purchasing one each, the total value for an exempt asset is $26,500.

  5. Prepaid funeral expenses and burial plots are also exempt, subject to a couple of conditions: the money cannot be refunded, there is nothing more to pay and it is a contracted payment (I do recognise that tip 5 and 6 are a little morbid).

  6. Your home and up to two hectares of land surrounding your property, regardless of the value, are exempt from the assets test.

  7. Investment properties are an asset which can be reduced by the mortgage secured against the investment property. If the mortgage is secured against your own home, it will not reduce the value of the investment property.

  8. Loans to family members (children) paying no interest, which you may not see as an asset, are considered an asset according to the social security legislation. Depending on the amount of money lent, this arrangement can have a detrimental effect on your entitlement, so be very careful before you agree to lend any money to family members.

  9. Selling an asset to a family member for less than it is worth can be viewed as a gift, so again be very careful. Gifting any amounts to your children in excess of $10,000 can have a negative effect on your age pension entitlement.

This is certainly not a comprehensive list of considerations and pitfalls, but it is an overview of the more common issues which do arise.

Mark Teale, age pension and aged care technical adviser, Centrepoint

When can you access the age pension — if at all?
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