This thread has been written to provide an overview of the Australia Age Pension system.



Eligibility

Generally to be eligible to the Australian Age Pension you will need to be in Australia and a permanent resident/citizen at the time of applying and generally need to have been in Australia for a continuous period for at least 10 years or for a number of periods that total more than 10 years with one of the periods totally more than five years.

The age of eligibility is being equalised to age 65 for men and women and will gradually be phased back to age 67.


Payment amounts


Currently the Age Pension is around $30,000 annually for couples and around $19,000 annually for a single person.


Means Testing

The Australian Age Pension unlike the UK Basic State Pension is ‘means tested’ based upon one’s assets and income streams.


The income and assets test is applied (described below) and the outcome that produces the lowest result is used to determine the payment amounts.


Income Test

A couple can effectively receive up to around $7,000 annually of Centrelink assessed income without reduction to the Age Pension amount under the income test.

If Centrelink assessed income is over around $67,500 annually then no Age Pension is payable at all.

(The thresholds are different for singles)


Assets Test

If a couple have over the Centrelink threshold in assets currently $273,000 excluding the family home then the Age Pension amount received starts to reduce gradually depending on the amount of assets held over the $273,000.

If Centrelink assessed assets are over $1,050,000 then no Age Pension is payable at all.


(The thresholds are different for singles and non-home owner couples)


For further information on the please see here Australian Age Pension information


Potential Strategies

There can be perfectly legitimate ways whereby it is possible to receive a higher amount of Australian Age Pension than first thought by structuring and rearranging assets and liabilities slightly differently.

A couple of examples of this are:



  • When Centrelink apply the ‘Income and Assets Test’ they ignore monies held in Superannuation if the person is under Age Pension age.



Therefore if a member of a couple is over Age Pension age and one is under Age Pension Age moving assets into Superannuation in the name of the person under Age Pension age could be a consideration which could then mean an increase Age Pension payments for the person over Age Pension age.




  • Another is that the Centrelink Income Test is more favourable if someone has money held in an Account Based Pension as opposed to in the Bank or in a Super Fund.




Therefore for people approaching retirement that may be over the ‘Income Test’ threshold in retirement then transitioning assets eventually into an Account Based Pension could be a way of reducing income under the ‘Income Test’ thus potentially increasing the Age Pension payment amount received.

Director - Vista Financial Services - Financial Advisor for Poms in Oz - UK Pension Transfers / Financial Advice
Andrew@vistafs.com.au AFA Member, Adv Dip FP www.vistafs.com.au Ph: 08 8381 7177