By Mark Teale on Nov 6, 2019
(Realise Your Dream)
Last week I wrote about the Age Pension – what, when and how much?
This week I am continuing the discussion, focusing on one aspect of the means test which is applied to calculate a person’s entitlement – their assets.
Your age pension entitlement can be affected by your assets, whether you own your home, which is an exempt asset (homeowner), are renting (non-homeowner), and if you are single or a member of a couple. The following table provides an overview of the current asset thresholds and limits as at November 2019.
Assets Test threshold for the full age pension
|Status||Homeowners – assets must be less than||Non-homeowners – assets must be less than|
Assets Test upper limits
|Status||Homeowners – to receive a part pension, assets must be less than||Non-homeowners – to receive a part pension, assets must be less than|
Here are ten things to consider when you do apply for your age pension.
- Be aware that the value of your household contents, including your motor vehicle and personal effects, is ’fire sale’ value – not the insured value or the replacement costs. The difference in the two amounts can be substantial and can have a considerable effect on your entitlement. For example, the insured value of your home contents could be $80,000 as opposed to a fire sale value of $10,000. The difference in the two asset valuations could equate to $210 per fortnight in extra age pension just by ensuring that the fire sale valuation is used.
- Superannuation in accumulation held in a partner’s name who is under pension age is not an asset and not assessable for the purposes of the assets test when calculating your age pension entitlement.
- Shifting assets between partners is not seen as gifting – this can be very effective when you consider item number 2.
- Lifetime annuities with a nil residential capital value can be very effective in increasing a person’s entitlement under both the assets test and the income test.
- A funeral bond up to the value of $13,250 is an exempt asset. For a couple purchasing one each, the total value for an exempt asset is $26,500.
- Pre-paid funeral expenses and burial plots are also exempt, subject to a couple of conditions – the monies cannot be refunded, there is nothing more to pay and it is a contracted payment (I do recognise that tip 5 & 6 are a little morbid).
- Your home and the –(maximum of 2 hectares) land (curtilage) surrounding your property regardless of the value are exempt from the assets test.
- Investment properties are an asset which can be reduced by the mortgage secured against the investment property. If the mortgage is secured against your own home, it will not reduce the value of the investment property.
- Loans to family members (children) paying no interest, which you may not see as an asset, are considered an asset according to the social security legislation. Depending on the amount of money lent, this arrangement can have a detrimental effect on your entitlement, so be very careful before you agree to lending any money to family members.
- Selling an asset to a family member for less than what it is worth can be viewed as a gift, so again be very careful. Gifting any amounts to your children in excess of $10,000 can have a negative effect on your age pension entitlement.
This is certainly not a comprehensive list of considerations and pitfalls, but it is an overview of the more common issues which do arise.
Applying for an age pension when the time comes can be a very daunting proposition.
The application itself is 25 pages long and asks a total of 89 questions. In addition to this form, you will also be required to complete an Income and Assets questionnaire, another 17 pages and a further 55 questions!
You may not need to answer all the questions but working your way through the interrogation maze will still require your patience and a degree of care.
It is very important to remember that the age pension application is a legal document and there can be penalties for supplying incorrect information.
If you are in doubt about any of the questions or the information you have supplied, make sure you talk to an expert who understands the forms and what is required so that you are able to claim your maximum entitlement.
PK believes people have the right to accurate, affordable and unbiased information that addresses all aspects of their preferred retirement lifestyle, thereby giving them the opportunity to make informed decisions that will empower them to live out their lives with dignity, certainty and security.
Tealey’s ambition is to change how people think about their retirement, he wants people to dream, plan and realise retirement is not defined by a magical age prescribed by the legislation.
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