Your assets test questions answered

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.