Older Australians might be eligible to receive the Centrelink Age Pension payment if they meet the age, income and asset guidelines.
The payment, which is designed to help fund retirees in retirement, is subject to an age, income and asset test.
The good news is, the rules are about to change, making more Australians eligible.
Here’s everything you need to know.
Age limit and maximum payment
The Age Pension is available to Australians aged 67 years and older.
It is paid on a fortnightly basis up to a maximum total payment of $1,200.90 per fortnight for singles and $1,810.40 for couples combined.
These sums include the maximum basic rate, the maximum pension supplement, and the energy supplement.
The final amount you’ll receive (if anything) is heavily dependent on your income level and the assets that you own.
Age Pension income test
The income test assesses all of your income, pooled from all sources. That includes anything from superannuation contributions, investment income, part-time wages, bonuses, or commission payments. It’s applicable regardless of your age.
From the 1st of July, the amount you can earn in retirement is expected to go up by $8-$16 per fortnight depending on your circumstances.
In order to receive the full Age Pension, from the 1st of July, single Australians are expected to be able to earn up to $226 per fortnight, and couples can earn up to $396 per fortnight.
But it’s still possible to receive a part pension if you earn over those thresholds. And Centrelink has raised these too.
From the 1st of July, singles are expected to be able to earn up to $2,627.80 per fortnight, and couples (living together) can earn up to $4,016.80 per fortnight and still qualify for at least a part-Age Pension.
But, it’s important to note that your income is assessed on a sliding scale.
For a single person, your Age Pension will reduce by 50 cents for each dollar over $226 and for couples it will reduce by 25 cents for each dollar over $396.
It means that the more you earn, the lower your Age Pension payment will be, until it reaches zero.
Age Pension asset test
The asset test includes everything you own in full, in part, or have an interest in, but excludes the home you live in.
In order to receive the full Age Pension, from the 1st of July, single homeowners are expected to be able to own assets (including superannuation) up to a value of $333,000. For non-homeowners, this will be up to $600,000 in retirement.
But a couple has a different threshold, and it’s not double the amount of one person. From the 1st of July, a couple combined can own up to $499,000 in total if they own a property, or $766,000 if they don’t.
There is a similar rule for your assets, too. From the 1st of July, if your assets are less than $733,500 if you’re a single homeowner, and $1,000,500 if you’re a non-homeowner, you are still entitled to some level of payment.
Couples are also entitled to a part-payment so long as their combined assets aren’t more than $1,102,500 for homeowners. Non-homeowners can own assets totalling up to $1,369,500.
In order to determine how much income you make from your assets, Centrelink uses a deeming rule. And it looks like these deeming rate caps will get a boost next month too.
Deeming assumes your financial assets earn a fixed, set rate of income, regardless of what they actually earn.
This assumed income is then added to your other income to determine your Age Pension rate.
For single Australians, the first $66,800 of your financial assets will have a deemed rate of 1.25%. Everything over that is deemed to earn 3.25% interest.
Couples will have a 1.25% deeming rate on their first $110,600 of combined financial assets (this includes superannuation). Anything over $110,600 is deemed to earn 3.25%.
Don’t forget the ‘lower of two’ rule
The Age Pension eligibility depends on your income and the assets that you own. To ensure the system is fair, the Centrelink assesses you under both tests. It then applies whichever gives you the lowest rate of payment for your individual circumstances.
The post Australia’s new Age Pension rules: Age, income and asset tests explained appeared first on The Motley Fool Australia.
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