Assets defined

We enjoy receiving member questions for a range of reasons. The main one is because our whole team wants to  help Australians maximise their retirement income and answering tricky questions is one way of doing this. But another reason why we value the many thousands of member questions that we receive every year is because we learn so much about the things that concern Australian retirees and the rules which seem overly complex.

The definition of what is and is not an asset is a case in point. This is a question that we are asked in just about every iteration that you can imagine. There’s a reason for that. It’s because whilst an asset can be defined, the way it can affect your Centrelink entitlements can vary. Put simply, some assets matter more than others. Some are assumed to earn you benefits and others are not. And the rules behind these assumptions are not necessarily logical.

Your family home

Take, for instance, the family home. This is, for most Australian retirees, the single biggest asset they have in retirement. This is because the median value of the home nationally is $912,000. This amount dwarfs that of median super balances in 2023 for those entering retirement, aged 65-69, which are:

Male $213,986
Female $201,233
(ASFA Update on Super Account Balances 2023)

But interestingly, despite most older Australians holding hundreds of thousands of dollars in their homes, Centrelink considers the home to be an exempt asset, meaning that it is not evaluated for the assets test, nor is it deemed to earn income and so it is not evaluated for the income test either. It’s clear that your home does not ‘earn’ an income (unless rent is received, in which case it would have to be declared). But over time the value of the family home does generally increase and this gain is not seen as additional income by Centrelink either. Additionally, when and if you sell your family home it remains an exempt asset* for Capital Gains Tax (CGT), so again any growth in value is yours in its entirety.

It’s for this reason that it is important to appreciate the value of the family home as an asset that is practically ‘untouchable’ when it comes to Centrelink.

(*as long as you move in soon after you acquire it)

What about your other assets?

Apart from your home, your personal assets means anything that an individual or household owns in their own name, or joint names. This might be in the form of  money, investments, cars, insurance, works of art and more.

As noted above, Centrelink assesses your Age Pension eligibility in two ways using both an income and an assets test. The critical point is that some assets count towards the assets test only, and others are taken into consideration for both the assets test and are then also deemed to contribute towards your total income.

Financial Assets

Let’s consider financial investments, which are both assessable and mainly deemable. These are financial assets which will be assessed by Centrelink in order to establish whether you meet the required assets threshold for the Age Pension. Most of these assets are also deemed to earn income, which will be used in your income assessment for the Age Pension as well. Such financial investments include:

  • 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

What about more personal assets?

These are those assets which are not deemed but can still be assessed under the assets test.

Such assets include

  • Home contents (including furniture and appliances)
  • Personal effects (including jewellery, laptops)
  • Licences (taxi, commercial etc)
  • Surrender value of life insurance policies
  • Collections
  • Motor vehicles, caravans, boats

All assets must be declared on any Age Pension application. Those who already receive a government benefit are required to update Centrelink within 14 days of a change of asset values. 

The tale of Aunt Susan’s sofa: Beware this common error

The actual value of your items is their market value. That means the value if they were to be sold in a garage sale tomorrow (as opposed to replacement value for insurance purposes). What would they really fetch? Most people do not have more than $10,000 of furniture and personal effects – but many will declare a sentimental value which is much higher, on their Age Pension application.  This can end up costing them money as it could reduce their Age Pension entitlements. This happened with a friend’s aunt’s sofa which was a much admired family possession. But when Aunt Susan moved to an Age Care residence and her niece decided to store it, she added what she believed to be the value of this antique walnut and velveteen chaise lounge to her contents declaration– a hefty extra $20,000. The sad truth is that while everyone in the family loved this piece of furniture, they would be lucky to fetch even $500 for it on Facebook Marketplace. So-called ‘brown’ furniture is no longer in vogue, in fact many op shops can’t even give this type of furniture away. So it’s important to be less emotional when it comes to the value of your goods and chattels and think hard if the whole lot really would exceed the generally accepted norm of $10,000?

What about depreciation?

Another common misconception is that Centrelink will update your assets declaration with annual depreciation. It does not. You will need to do this. It can be a very worthwhile exercise because, if, say, your computer depreciates, so your assets will reduce. As long as you report this, you might then qualify for a higher pension payment. This happened with Tom  who had failed to revalue his old Corolla. It might not be a huge difference but every little bit helps.  Another example is bank account balances where spending a few thousand dollars on that dream holiday or a renovation could improve your Age Pension payments. You will only benefit, however, if you make the effort to update this information with Centrelink.

There’s a lot to understand when it comes to defining assets and income for Centrelink, in which case an Age Pension consultation may be helpful.

Alternatively, you may wish to consider the mix of entitlements and how your super works in a Maximise entitlements consultation with one of our trusted advisers. Above all else, be sure to try to understand the rules which apply in your own situation and how you can use them to greatest advantage.

More on assets from Services Australia.

Do you, too, tend to place a high emotional value on your assets? It’s difficult not to, but there are clear advantages from a more pragmatic approach.