The Australian Government provides a range of social security benefits to assist certain individuals and families. The type and amount of benefits you can receive depend on your personal and financial circumstances and your stage of life. Common benefits that retirees may be entitled to include the Age Pension, Service Pension, Pensioner Concession Card, and Commonwealth Seniors Health Card.
The Age Pension and Service Pension are subject to means testing, which means your actual rate of payment may be reduced because of your financial situation. Means testing includes calculating your payment under both an assets test and an income test – the one that results in the lowest payment rate will then apply.
What are the Age Pension and Service Pension?
The Age Pension (managed by the Department of Human Services) is a social security benefit designed to ensure that all eligible Australian retirees have at least a basic level of income in retirement. The Service Pension (managed by the Department of Veterans’ Affairs) provides the same type of support to eligible veterans and their partners, widows or widowers.
The Age Pension and Service Pension are generally paid at the same rates and normally subject to the same income and assets tests.
Understanding the assets test
For the purposes of the assets test, an asset is any property or possession that you fully or partly own. Assets are valued according to their net market (sale) value.
Some of the assessable assets covered by the test are:
- funds in bank accounts, shares and managed funds
- superannuation funds (once over Age Pension age)
- motor vehicles, boats and caravans
- household contents and personal effects
- property such as holiday homes
- retirement income streams such as account-based pension and annuities.
Some assets are exempt from the assets test, including:
- your principal home
- superannuation (while under age pension age)
- Certain retirement income streams purchased before 20 September 2007 (may be 50% or 100% exempt) – seek financial advice if you think you already have one of these income streams
- Pensions from a defined benefit superannuation scheme.
Under the assets test, your pension will not reduce until your assets exceed a lower threshold. Your pension is then reduced by $3.00 pf for every $1,000 of assets over this threshold.