Have you ever considered what the impact your super balance has on your age pension? This is a very complex area and due to constantly changing thresholds it can be difficult to navigate from year to year. The government calculates your age pension based on the assets test and income test and will apply whichever test results in the lower age pension payments.
**The below information is based on the rates from 20 September 2017 and may be subject to change.
The Assets Test:
To be eligible for the pension your assets must be below a certain threshold. Assets include your super balance, motor vehicles and boats, cash, investment properties, shares and other financial instruments. Your home does not count towards the assets test.
The Income Test:
To be eligible for the full age pension a couple can earn up to $300 per fortnight and a single person can earn up to $168 per fortnight. Your pension will be cut off when you earn more than $2,996.80 per fortnight for a couple and $1,956.80 for someone who is single.
The government calculates your income using a method called deeming. This means you don’t need to report every cent you earn (such as dividends and interest) but instead the value of the assets for calculation purposes. For couples the first $83,400 is deemed to earn income of 1.75%. The excess is deemed to earn income at 3.25%. This is irrespective of what income the assets actually earn.
Let’s go through an example:
Fred & Janet own their home and have a combined balance of $210,000 in super which they draw an income stream from. They also own a parcel of Westpac shares worth $54,000 and cash in the bank of $18,000. They own two cars with a combined value of $30,000.
Would they be eligible for the full or part pension?
The assets test is below the full age pension threshold however the income test is above the full age pension threshold.
Fred & Janet will therefore only be eligible for a part pension as the government will apply the income test in this situation.
Rates and thresholds are changing regularly so please contact Your Super Specialist here to discuss the impact of your super on your government age pension.
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.