How the rules work for you
In our recent article on the fairness of the Age Pension we received a few questions as to why the family home was listed in the comparison between three different retirement households.
These questions highlighted the need for clearer explanations of retirement assets and the Age Pension asset test. Today we share a plain English explainer.
What are assets?
Put simply, an asset is something that you own. This might be land, a house, a car, a painting or some shares. Some assets are tangible, whilst financial assets including bank deposits, superannuation and shares are less so.
Why do your assets matter so much in retirement?
The more you own, the more wealth you can draw upon in retirement. Some of your assets may form a retirement income stream (for instance, your super may be rolled into an Account-Based Pension and you will be paid regularly from this account). Other assets may be able to be sold (either wholly or partly) for cash injections.
Assets also form part of the Centrelink means test – when assessing your eligibility, alongside your income. Even though you may be one of the 30% or so of Australians who do not receive an Age Pension as they transition to retirement, it is important to know how the asset test rules work so that you can identify when your situation is changing sufficiently to make you eligible. This could happen if you have drawn down a lot of super and are now below the part-Age Pension assets limits.
Why is the home such an important asset?
Apart from good health, your home is the most important asset you own in retirement. This is because it can cushion the impact of the cost of living in retirement, when compared to renting. Your home, regardless of its value, is exempt from the Age Pension assets test. This means you might be living in a $5 million home (like Albert and Simone in the ‘tale of three retirements’ example) – but you still qualify for an Age Pension. The inclusion of the value of the home in this article was confusing for some Retirement Essentials’ members – they noted that it was exempt from the means test. This is correct, but apart from the accommodation security and other benefits of home ownership, the funds in retirees’ primary residences (median value $912,000 in 2023) are a potential source of further income. This money can be released by selling and perhaps buying a smaller property, typically referred to as ‘downsizing’ which frees up cash, but can also unlock benefits if excess funds are eligible to be contributed to superannuation. Homeowners can also access equity by using the government’s Home Equity Access Scheme (HEAS), or by accessing a loan from a private provider, usually in the form of a reverse mortgage.
Which assets are not exempt?
There are two types of non-exempt assets.
These are personal assets that are included in the assets test, but NOT deemed to earn income, such as:
- Household contents
- Cars and caravans
- Motorbikes and boats
- Personal effects including computer equipment and jewellery
- Surrender value of life insurance policies
- Collections
The other type are financial assets, including:
- Cash on hand
- Bank accounts
- Term deposit accounts
- Managed investments
- Shares and securities
- Superannuation
- Annuities and income streams
- Some gifts or loans
- Equity in a company
These financial assets are deemed, which means that they are assumed to be earning income.
How are assets deemed by Centrelink?
Centrelink applies a deeming rate to your assets, depending upon whether you are single or a couple.
The current deeming rates (until 1 July 2025) are:
| Thresholds (1 July) | Current rates (frozen until 30 June 2025) | |
| Singles up to | $62,600 | 0.25% |
| Singles Above | $62,600 | 2.25% |
| Couples up to | $103,800 | 0.25% |
| Couples Above | $103,800 | 2.25% |
Is this deemed amount of income on financial assets included in the means test alongside other income you earn from wages, or overseas pensions etc?
In short, yes.
But it is important to understand that any financial asset which is deemed need not be listed again as income if you apply for an Age Pension. So you do not need to list any share dividends – by listing your shares as assets, Centrelink will have accounted for this income as well. It’s also worth noting that the current deeming rates have been very low for a long time and that most Age Pensioners with cash accounts or share income will be receiving more income than that which is deemed by Centrelink.
What are common traps for those applying for an Age Pension?
We asked our team for common errors associated with the Assets Test. Sharon replied that the most common one she sees is confusion around the assessment of Defined Benefits Pensions (DBPs). Where the Defined Benefit has been converted to commence an income stream, only the income amount is counted in the income test. The asset value (in this case) is no longer counted in the Assets test. Customers assume that Defined Benefit Pension (income streams) are treated the same way as other superannuation assets and this is not the case.
Steven Sadler, head of the Customer Services Team says that the most common error is to think that, once an Account -Based Pension is started, the payments need to be listed as income. They do not – these savings are an asset which is deemed.
Separately, some retirees ask whether an Account-Based Pension or an Accumulation Pension is more favourably assessed by Centrelink. The answer is neither – both types of super are assessed as assets which are deemed to earn income.
Is there anything else that is useful to know about assets and the Age Pension?
Yes – if you are a single or a couple matters when you apply for the Age Pension, regardless of whether each of the couple is applying. Similarly, a younger partner’s super (in the form of an accumulation account) is exempt from a couple’s assets test. These rules are very important to understand as you approach retirement and possible Age Pension entitlement.
You may want further information on the ways that super is treated as an asset for Age Pension entitlement – in which case the Understanding Your Super consultation is very helpful.
Alternatively you may want to review the many ways you can maximise your Centrelink entitlements by having a better understanding of the rules that matter for your household.
Do you find the assets test confusing?
Or do you believe it is easy enough to follow?
Extremely confusing
Veru confusing. We have given every asset we own to Centrelink and have lived without a pension for over 10 years. We are also aware that some people are living on full pensions and have savings hidden away. One example: someone we know has an annual income of $70,000. We, until 2023 FY lived pn $50,000. Our advisor told us we are not drawings enough from our superfund and have increased it to$60,000, wher we withdraw $5,000 each month. Why do some people have a higher yearly income thanus?
I have just sold my house in Melbourne so I have now got financial assets and I have been on a carers payment looking after my husband.
Will my assets effect my carer’s payment that I am now receiving?
Hi Moira, Carer’s payments are not our specialty but if I had to guess I’d say it will be impacted. I’d recommend calling Centrelink on 132 717 to get clarity.
I was trying very hard to retain and understand the whole lot of information. unfortunately it is futile. information overload. there must be a simpler way to explain all these toa layman.
Compared to the UK, the Australian pension tests are far too complicated. The UK have no asset or income test and don’t penalise you if you still are working. Is there any reason why we have to be so complicated ? I do not work even part time as I will be giving the government 50 cents in every dollar I earn. In New Zealand, pensioners can work and just pay whatever income tax is payable – much fairer system, and the workforce is increased with older people who have valuable life skills.
My dad sold his unit and bought a 37 acre property and plan to retire. And he had a 2 young kids to his second wife. But the wife can’t work due to work injuries. Is the property will affect his pension?
Hi Broody, yes it is possible that the size of the property will impact the amount of pension as anything over 2ha can be assessed as an asset. To clarify the situation/impact fully I’d suggest booking a consultation HERE.
My husband and I are from China, we have pension monthly, but we don’t have super. Therefore, I couldn’t go on with the asset assessment when I tried it.
Does the interest earned on my term deposit count as income or only the 2.5% count as income – but we are only allowed to earn 11000 income ????? After retirement
Hi Rob, only the deemed income will be assessed, if you earn more then that in interest then that is a nice win with no impact.
Home owner single , assets are not high , no super , shares etc . Have some savings in a bank Acct – is there at stated amount that one can have in bank in savings before it affect receiving full aged pension in NSW ?
Hi Mx Hamilton, the asset threshold you need to be under to receive the full age pension as a single, home-owner is $314,000
Is the *interest * on my account based pension ( the amount of super that is used to “ pay me” every month ) assesed as income ? I understand that as a single I can currently have approximately $290 k as assessable asset and still receive a full pension
Hi Martin. The interest (earnings) on you account based pension (ABP) are not assessed as income. Nor are the payments you receive from your ABP treated as income. Instead Centrelink applies the deeming rates to the balance of your ABP and this deemed income is assessable. How much you can have in an assessable assets and still receive a full age pension will depend on single or couple (you said you are single) and homeowner status. Under the assets test a single homeowner would qualify for a full Age Pension if their assets do not exceed $314,000 and for a non home owner the amount would be $566,000. There is also the income test to consider. If you had no income under other than deemed income from your super then you would also get a full Age Pension under the income test with an ABP of $290,000.
I have a hobby farm, consisting of 30 acres. I was told I can only own 5 acres, and the rest of the land value is included as an “Asset”. Is this correct? How is the excess land valued?
Hi Janet, there are scenarios where land owned in excess of 2.5ha can be assessable as an asset but there are a few exceptions also. It’s be best to book a consultation (HERE) with a specialist who can go through your specific situation and confirm how Centrelink will assess you.
As a fellow small property holder who recently started on a Pension, my understanding is
as follows.
Firstly, if your 30 acres have been in your ownership for 20 or more years you can apply for an Asset Test exemption. They must however be on one title.
Secondly, the value of your 25 acres in excess of 5 will be determined by your local Govt. rate notice. at the CIV rate. Centrelink will divide your CIV valuation by 30 then multiply
that by 25 …. that amount will be calculated towards your Assets and deemed.
Ultimately it is great to be receiving a pension but at some point surely a $5 million home is going to need to be sold or reverse mortgaged. I don’t believe the cost of the aged pension will be sustainable in the long term.
we have an investment property. the rent is paying the mortgage repayments , is counted as income please
Hi Priscilla, yes the rent received will be assessed as income by Centrelink even if it is going towards a mortgage.
Very confusing
I thinnk the asset test is straightforward. However the form to apply for the Age Pension is very confusing. I know I will quolify for the Age Pension but he process of applying is beyond me and therefore I am losing benefits as a result.
is rental property value included in asset test and its value deemed for income test?
is rental income subject to income test?
thanks
Hi Vinh, yes the value of a rental property is included in the assets test but no there is no deemed income. Only the rental income, if there is any, is assessable.
Does granny flat for family use include in asset test ?
I’m sorry Tran but I’m not sure what you mean, if you could re-phrase your question I’ll be happy to try and assist.
Would you please clarify the answer to this. If I have an investment property worth $1,000,000 what amount is included in the assets test. Say net rental income is $20,000.
Hi David, Centrelink will assess the full private sale value of the property as an asset (minus the value of any mortgage secured against it if there is one) and they use the term ‘assessable rental income’ for how much rent is assessable as income because their criteria is different to the ATO so they may assess the figure as more then the net figure that the ATO uses. If you’d like further assistance with your specific situation we do offer a consultation service that you can book HERE.
The Rental is an asset. If it’s value is high it could negate the rent for pension purposes. imho
Once again and again and again …the massive discrimination. A couple (no matter that couples cost society billions when they divorce or domestic violence happens), gets far more concessions than single people, who do not cost society billions in DV and divorces. The younger part of a couple (and they do not even have to live together!!) has their super exempted from the assets. WHY???
The case you mention does not take into account that the younger person’s income effects the pension of the older person. Effectively my partner pays 83 cents in the dollar. For your information I have never cost the government any money not having divorced or been involved in domestic violence. I brought up 4 children with no funds from the government. Not even a student’s allowance. I am not and never have been a millionaire. From a financial point of view, I would be far better off single with no children. I am however happy as I have 5 grandchildren and excellent relationships to keep me content in my old age.
I have made several withdrawals from my super since 2018 to combine with my carers pension for my parents, & when they died deposited the inheritence back into super,will this be a problem applying for aged pension & how far back do they look at your affairs ???
Hi Craig, based on your explanation there will not be any issues with Centrelink. I presume you are concerned that the money from your super given to your parents will be considered a gift? If so, gifting rules only apply to the current financial year and the previous 4 so given you did it back in 2018 it will not be of concern.
On reassessing my financial situation, is my portable pension from NZ and Centrelink payments themselves regarded as income? Are the dividends from declared NZ and AU shares all deemed income so not included in income?
Hi Rosemary, Centrelink do assess foreign pensions you receive as income however Centrelink does not assess the Age Pension you receive from them as income. Regarding dividends, Centrelink apply the deeming rates to the total value of your shareholdings to determine the amount of assessable income. The dividend payments you receive are inconsequential.
Hallo, I’ve made several lump sum withdrawals from super for travel and renovations and have updated my assets on the Centrelink website .. but my pension is still the same amount ! .. do I need to reapply for the pension with my new asset values ?
Hi Jane, it can sometimes take Centrelink a few weeks to process changes and recalculate your pension but if you have already waited this long then you may wish to call them on 132 300 to make sure it does get processed and backdated to the day you submitted them.
Hello. I am currently 68 years old and returned to Australia in 2016. I began working in April 2017 and contribute to a superannuation fund. I am an Australian citizen but I understand that I am not entitled to an Australian pension until I’ve been back in Australia for 10 years. not including the first year as I was on a tourist visa. if this is correct then I will need to work until I’m 72 before I can claim my Australian pension. please advise .
Hi Paul, if you never lived in Australia as a permanent resident or citizen prior to 2016 then yes you are correct. You said you “returned to Australia” though so previous years spent living here may be able to be included to meet the 10yr requirement sooner.
How are shares held in an international share trading account treated in your asset test?
Hi John, foreign assets are assessable the same as Australian based ones. You’ll need to provide a statement from the platform you use clarifying the shareholding.
Very good article. Im not quite at pension age, but am effectively retired living on a self nominated income from my private pension account. (I can change the amount I draw quarterly if I wish).When I apply for the Fed pension at the correct age do I include my self nominated annual income from the pension account of my Super , or include the total amount/balance in the Pension Account?
Hi Andrew, you would declare your super as an asset, the term used is Account-Based Pension, and you will be assessed based on the total balance of the account. The amount you draw down is not assessed.
If I sell my home to travel within Australia and invest the proceeds of the sale in a term deposit is it immediately included in the asset test and is the interest earned on the investment amount also included. I’ve been told I have 12 months lead time.
Hi Vinnie, it is possible to have the proceeds from your sale exempt from asset testing however it depends on what you intend to do with the money. The exemption applies to allow pensioners the necessary time to buy/build a new house and not lose the Age Pension in between. If you are not planning to buy/build a new home then the exemption will not be applied.
Hi, I am almost 80 yrs old and single (widowed 10 years ago). I own a plane and I know its value on today’s market is around $150K but was told that I can put a lower figure which is the “fire sale” amount if I needed to sell it “today”. That figure would be around $45-$50K max. How is this treated by Centrelink? I’m not ready to sell it just yet.
Hi Jenny, Centrelink assess assets like planes and cars based on the private sale value as opposed to say the insured or replacement value which is often much higher.
Retirement is hard work and confusing you have to much your in trouble have to little your in trouble your better dropping off someone else’s problem everybody wants to know your business
My wife and I are both over 70 years old. We own a house outright, which is our principal residence. Each of us has an Account based pension fund, of which the combined balance is over $2 million. We also have bank accounts of which the balances amount to over $1 million.
Currently, we do not receive an aged pension. Can we expect any part pension from Centrelink?
Hi Fred, the current asset threshold for a couple who own their home is $1,045,500 so no you would not be eligible for any payment from Centrelink based on your $3m in assets.
How are household contents valued? Would I use my household contents insurance vale for Centrelink. I read somewhere it should be at ‘fire sale’ value.
Thanks
Hi Robyn, fire sale value is correct, Centrelink are assessing what cash you could potentially gain from selling your contents which would almost certainly be less then they are insured for.
Hi a friend of mine owns a property in Victoria and recently purchased another in NSW. The NSW one has a bridging loan and $400k is owed as another loan. the VIC one is the PPR until it is sold. Centrelink are saying that he owns 2 properties and are now looking at reducing his pension. The bridging loan coy has title on both properties now and really when you apply common sense here there is no ownership in the NSW one till the two loans are paid. Is this right?
Hi Simone, unfortunately Centrelink’s assessment of the situation is correct. Only the primary residence is exempt from assessment, any/all other properties owned are assessable.
Thanks Steven. You mention the word “owned”. The 2nd property is not owned whilst it has 2 loans, there is no equity in it at all.
Hi Simone. The investment property (2nd property) will still be assessed as being owned regardless of whether there is any debt against it. But if there is any any debt secured against the investment property the equity will be reduced which will reduce the assessable assets.
I have separated from my husband and I’m living in my own home with a mortgage. My husband is still living in our marital house mortgage free.
Am I entitled to a pension while I wait for the marital house to be sold as part of our divorce?
Hi Alexa, you may be eligible for a part pension however your share of the other house will be assessable as an asset so you may only be eligible for a smaller pension. Once the house is sold you will then have the proceeds assessable so no immediate change to your pension however should you choose to use the proceeds to pay off your current mortgage then your pension would be increased.
I am leading up to retirement in 2025, I own my home and have $800000 in my superannuation fund and around $150000 in cash and debt free. Would I be eligible for anything regarding a part pension/support as a single person? Dean
Hi Dean, the asset threshold you need to be under as a single home-owner to get at least some Age Pension is $695,500 so based on the figures you shared no you will not be eligible yet.
My wife and I own a share portfolio worth approx $2.5 million. We also own a holiday house which is not rented out. We currently live largely from the dividend income of the shares. How does centrelink value these assets in terms of the Commonwealth Seniors Health Care Card?
Hi Geoffrey. There is not an asset test for the CSHC, just an income test. As a couple you meet the income test as long as your income doesn’t exceed $158,440. The income test is made up of your adjusted taxable income (here’s a link to more on that) which for most people will be as per their tax return plus any deemed income from account based income streams. Our eligibility calculator can work this out for you if you want to check here.
Very confusing especially if one partner is 14 years younger than yourself. All our Super is in my partner’s name. She works. At 77 I receive a small pension. Recently she got a 5% pay rise. My pension was reduced. Effectively about 25% of her pay is taxed at 32% and the rest of her earnings reduce my pension fifty cents in the dollar. Effectively she pays 82% Tax. If I was a billionaire I would not complain. In addition, I have a rental property. Whether this asset was worth $1 or 1million it makes no difference to me. I cannot in conscience sell it as this would put a family with 2 young children on the street. I cannot pay the mortgage off as this would make my partner ineligible for a pension when I die. We intend to leave the rental to the tenants in our will. In the meantime, when my partner retires, she will not be able to negative gear the property. Our total loss will be around the $6,000 mark.
At 78 I found the whole process of applying for a (part) pension beyond me so ended doing it through Centrelink staff themselves who were understanding and patient although it took ages to complete.
Now it is a matter of complying with their requirements
Can you please put up a page with all the meanings to the terms you use, understanding all the different terms you use in a spreadsheet would be helpful.
I am 82 years of age Male and part of a homeowner couple am I eligible to purchase a lifetime annuity or a fixed term annuity to get a partially exempt 60% assessable asset.
Hi Kevin, you may be eligible but different annuities are assessed in different ways so it is too complex to give a simple yes/no. You’d be best to speak with one of our specialists HERE who can go over the intricacies or contact the annuity provider for further clarity.
As a recent subscriber to Retirement Essentials and a part pension recipient I always read
these comments with interest.
My comment is based not so much on the nitty gritty of retirement funding but on the recipients philosophy underlying their retirement planning.
What appears to be a common underpinning belief is that the wealth/assets you commence retirement with should be preserved until you die. The systems expectation that you “use” your Assets to live on ( with or without a Pension) seems to somehow be seen as unfair, a denial of entitlement after years of “contributing” etc. etc. by many.
Many with Assets in the millions seem to feel ill done by if they need to use these assets
for retirement, especially if ineligible for a Pension.
When preparing for retirement consider your philosophy on retirement funding, not just
the income. If you believe that when you die your estate should be that same as when
you retired then I would suggest your retirement will not be very fulfilling. If you have
millions in assets why not use them ? It is not the Govt’s responsibility to preserve your
wealth !
So true!
My wife is 10 years younger than me and will still be working when I turn 67, I assume I will be assessed as a couple for the asset and income tests, but will I be paid the single or couple pension rate?
Hi Mark, thanks for reaching out! You are correct that you will have the couples’ thresholds applied to you and you will receive your 50% share of the couples’ Age Pension payment, not the single.