Is this assessable?
Two weeks ago we explained how the assets test works and how different assets can be treated very differently by Centrelink. At the end of this article, we asked if you find these rules confusing and you certainly answered – in the 70 comments which followed.
Because there are so many different rules, it’s impossible to cover each and every instance. But given the many different types of assets that people may own, today we wanted to share some of the specifics on investment properties, foreign pensions, household contents, exemptions and more. Here are the answers that our team (led by Guru Steven Sadler) gave to questions on these concerns.
Rob asks about a term deposit:
Does the interest earned on my term deposit count as income or only the (deemed) 2.5% count as income (given that) we are only allowed to earn $11,800 income after retirement.
Steven replies:
Hi Rob, only the deemed income will be assessed, if you earn more than that in interest then that is a nice win with no impact. Regarding the $11,800, I believe you are referring to the Work Bonus credit, which is for income from employment, so you actually can earn more than this. Here’s an overview of this aspect of the income test.
Hamilton asks about bank account limits:
I’m a single homeowner , assets are not high, no super or shares etc. I have some savings in a bank account. Is there a stated amount that one can have in bank in savings before it affects receiving full Age Pension in NSW ?
Steven was able to clarify:
Hi Ms Hamilton, the asset threshold you need to be under to receive the full age pension as a single home-owner is $314,000. The Age Pension is a Commonwealth Government initiative, so these thresholds are applied in every state and territory.
Martin wonders how Account-Based Pension payments are viewed:
Is the ‘interest’ on my Account-Based Pension (the amount of super that is used to ‘pay me’ every month) assessed as income ? I understand that as a single I can currently have approximately $290,000 as assessable asset and still receive a full pension
James says:
Hi Martin. The interest (earnings) on your 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 depends upon 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 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.
Priscilla has a question about rent
We have an investment property. The rent is paying the mortgage repayments. Is this counted as income?
Steven says:
Hi Priscilla, yes the rent received will be assessed as income by Centrelink, even if it is going towards a mortgage.
Vinh also has an investment property:
Is rental property value included in the assets test? And is this value deemed for the income test? Also, is rental income subject to the income test?
Steven confirms it is only assessed once:
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.
David also asks about this rule
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.
Steven notes the mortgage amount doesn’t count:
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 than the net figure that the ATO uses. Every case is different, so if you’d like further assistance with your specific situation we do offer a consultation service that you can book HERE.
Rosemary has an overseas pension and shares:
On reassessing my financial situation, is my portable pension from New Zealand and Centrelink payments themselves regarded as income? Are the dividends from declared New Zealand and Australian shares all deemed income, so not included in the income test as well?
Steven explains how this is assessed:
Hi Rosemary, Centrelink do assess foreign pensions you receive as income however Centrelink does not assess your Australian Age Pension as income. Regarding dividends, Centrelink applies the deeming rates to the total value of your shareholdings to determine the amount of assessable income. The dividend payments you actually receive are therefore inconsequential.
Jane has spent some super:
Hello, 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 ?
Steven believes this may need follow-up:
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. Assuming your total assets are now lower, it follows that your Age Pension entitlement may now be higher, so it is in your interest to follow up.
Paul has returned to Australia and needs the rules clarified:
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?
Steven thinks previous time here may change the situation:
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 10-year requirement sooner. It’s best to check the status of these previous years.
John has international shares:
How are shares held in an international share trading account treated in your asset test?
Steven explains the rule:
Hi John, foreign assets are assessable the same way as Australian based ones. You’ll need to provide a statement from the platform you use clarifying the shareholding.
Vinnie is thinking of selling:
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.
Stephen explains how exemptions work:
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.
What about household contents, asks Robyn?
How are household contents valued? Would I use my household contents insurance value for Centrelink? I read somewhere it should be at ‘fire sale’ value.
Thanks
Stephen shares what you need to declare:
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 than they are insured for. This type of valuation is also referred to as ‘garage sale’ value – many people will declare household possessions as worth $10,000 unless they have items of high individual value.
We hope this round-up of commonly asked questions enables you to better understand how the asset test works in practice. But we genuinely enjoy helping you to get across the detail you need, so if there are further questions we’ve yet to cover on assets, please let us know.
A quick way of working out your own eligibility is to use the free Age Pension Entitlements Calculator. This will give you a snapshot of your situation and how the rules are applied for your household.
Our advisers can also assist to maximise your entitlements if you feel you need support for Age Pension applications or a review of your current payments.
after a year on jobseeker at 62 ..someone in admin changed my 2 retail rental valuations to end up over the asset limit..now I’m getting investigated as to why.. and kicked off centrelink and my cards cancelled…unbeleivable..I haven’t been issued with any letters yet..so I’m quietly stressing about the whole thing
Call Centrelink Steve. I have been suprised how helpful they were. Just have a book to read or similar while on hold.
We are currently in NZ and moving to Australia. We lived in Adelaide 2006-2013. We both receive an NZ pension. Once we move to Australia and are paid by Centrelink is the NZ portion of the super payment means tested
Hi Renate, yes Centrelink do assess NZ pension as income so it will impact how much Aus Age Pension you receive.
You mentioned earlier:
“The interest (earnings) on your 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” What about if your superannuation is in Accumulation Phase. I am 72, I chose this option, as I can withdraw funds as I need them, rather than a set 5% set by the Government.
Hi Ray, superannuation in accumulation is assessed exactly the same. Centrelink assess’ the total balance as an asset and then applies the deeming rate to determine the income generated that will be assessable.
hello, i went to centrelink to tell them about some shares i brough. they said not to worry because then system will pick them up.Is this true?
Hi Rhys, no I would not be trusting what the staff member said. Their system will automatically update the values of your shares as they have access to the ASX just like anyone else, but Centrelink does not know if you have bought or sold shares and you should be updating those balances.
Hi Stephen, my wife is receiving a part pension I am not eligible until February and have given up working and living on the part pension plus interest which is about $3,000 per month, I’m worried about getting a sizeable tax bill next financial year, should I put most of my savings into Super I considered this but I don’t know if I can draw down as I need money and what the pension and taxation ramifications are, what would you recommend?
Thanks mate
Hi Ron, it’s a great question you are asking but outside my expertise sorry. My recommendation is speak with one of our specialists via a consultation as they can go through the pros/cons of your options so you can make the best decision for your situation. To make a booking, CLICK HERE.
Should I declare overseas property I own with my 4 siblings? I don’t think they are worth much and they are all just bits of land, possibly once farmed. Except for one piece now idle. I would declare if ever sold. Some of it is also occupied by the army and we get no rent from it and can’t really it as it’s occupied by the army.
Hi Aysen, yes you should declare the property(s). Even if they are not highly valuable it is better to declare everything up front to avoid having a debt raised against you later on down the line.
What are the thresholds for receiving zero aged pension, Lots of mention of when it becomes a part pension, but not when we lose it altogether?
Not sure about your answer on rental income; you mentioned rental income is assessed by Centrelink without any genuine costs deducted like insurance, repairs, mortgage interest, rates, depreciation, management fees? It seems that Centerlink are basing their assessment on turnover only.
This just doesn’t seem correct as all of these will reduce the rental income significantly, especially in the early years to the point of negative gearing; I guess by retirement age the properties should be getting towards positive geared, but some people will keep buying to stay negative geared depending on their tax position. Obviously the properties will attract CGT on sale eventually.
It would be the same as a retired person baking cakes for a profit, and Centerlink only considers the sale price of the cakes, not with the costs involved. Does this assessment also work for share trading, i.e. Centerlink will only consider the sale of the shares, without considering the costs of purchasing? Just doesn’t sound correct to me.
I was advised in the early 80’s, do not expect an aged pension from the government when I retire, no matter how much tax you have paid through your working life. Luckily I have built up a good SMSF from the age of 16 to retire on….hopefully.
Best I continue working on my own investments forever, or get someone to manage it for me when I am unable to.
Hi, how is a defined benefit pension treated by Centrelink
Hi Eric, Defined Benefits are assessed as income based on the gross amount minus up to 10% depending on your untaxed component.
How Is jewellery valued? Replacement or re sale.
Hi Lesley, jewelry should be declared at private/garage sale value, not insured or replacement.
Hi,
I am of retirement age but still working full time, can I have all my earnings put into my SMSF via salary sacrifice then draw a wage from my super as I am told I do not qualify and will not be eligible to receive a pension.
Hi Greg, what you are suggesting is possible but is not as simple as you might think. Once you convert some/all of your super into a pension account to draw an income from it, you can no longer make contributions into the account. So to do the strategy you have suggested you would need to split you super in to 2 accounts, one in pension phase and the other in accumulation and then you can contribute to the accumulation account whilst drawing from the pension one.
Are funds in a home loan redraw account assessed by Centrelink as an asset.
Hi Neil, no they are not so long as they are in fact in redraw and not an offset account.
Given the push for persons to work longer if fit and able, what is the situation regarding not paying super to employees after certain age ? It seems unfair to me that two persons doing the same job get paid differently because one is older
I am currently 64 and plan on retiring at pension age at 67. I don’t have much in superannuation (about $75000). My wife is from Thailand and has her own property but is not an Australian resident. I plan to move permanently to Thailand once I retire. Will I still get a full pension?
Hi Dirk, there are a few factors that go into whether or not you can receive the full pension when moving overseas. To find out whether you specifically would or not we’d need to have a formal consultation with you to discuss it. To make a booking CLICK 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.
We own our primary residence in WA and have also bought a retirement unit in SA. This unit is subject to an exit contribution (of 35%) when we sell. What value of this unit do I declare to Centrelink when we apply for a partial age pension – ie is it the full market value of the unit or market value less amount of exit contribution?
Hi Jan, you may wish to double check with Centrelink on 132 300 to be certain however the value would likely be assessed as the sale price minus the exit contribution given that is all you will have left over. Similar to if a property is sold with a mortgage still owing, the value is what is left over after the mortgage is paid.