Assets count with the aged pension
The aged pension is always changing and the increase to soon of $38.50 per fortnight for singles and $27 per fortnight for couples will help the increasing costs of living.
Two assessments are used for pensioners:
- Assets based
Assets cut-off point for a homeowner couple is currently $1,050,000 and $707,750 for a single pensioner.
If you do not own a home then these amounts will increase by around $140,000.
- Income Based
The income test cut-off point for a couple is $67,537 and $44,127 for a single pensioner.
Your financial assets are deemed to be earning 2.5% for the first $75,600 for a couple and $45,400 for a single pensioner and then 4% on the balance.
e.g for a couple with $300,000 in financial assets their deemed income would be $10,866 a year being 2.5% of the first $75,000 which would be $1890 and 4% on the remaining $224,400 which would be $8,976.
These will include all interest bearing deposits, debentures, shares, share trusts, and friendly society and insurance bonds.
However , it does not include property, annuities and money in account-based pensions.
These rates apply irrespective of the amount actually earned on investments, so pensioners actually earned on investment, so pensioners can gain an advantage if they can get safe returns that are higher than deeming rates.
Gifting – if you gift in the previous 5 years then they amounts will be treated as a deprived asset.
Once you receive a pension a single or a couple can make gifts totalling $10,000 a year or up to a maximum of $30,000 in any five years, without any adverse effect on their pension.
A single pensioner can earn $32,279 a year and pay no-tax.
A couple can have a combined income of $57,948 and pay no tax.
The pension starts to reduce for a single when income exceeds $3952 a year and for couples at $6968 a year.
Under the deeming rates that will take effect on March 20, these levels will be reached when total financial assets reach about $116,000 for singles and $202,000 for a couple.
The main reason to hold money in superannuation is minimise tax and get an advantage under the income test if you are receiving an income stream from your superannuation and it has a deductible component.
The deductible component is based on the purchase price of the income stream divided by your life expectancy.
Income-tested pensioners can potentially improve their Centrelink position by commuting and recommencing superannuation pensions to maximise deductible amounts.
Your life-expectancy falls over time – the viability of this strategy depends on the value of the pension today versus the original purchase price.