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.
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.
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.
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.
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???
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.
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.