The Age Pension: Do You Qualify?

Simply put, an age pension is the main source of income support for people who have reached the Age Pension age.  It provides an income stream for life for those Australians who meet the eligibility requirements and is a taxpayer-funded retirement type income stream.  In order to be considered for the age pension you must have reached a certain age, known as the pension age, meet residency requirements and you must pass the age pension assets test and the age pension income test. So how do you know if you are eligible for an age pension and if you meet the requirements?

To start with, you Age Pension age, which is the age at which you are able to apply for the Age Pension is dependent on your date of birth.  To help you figure out your Age Pension age, see the table below.

Once you’ve determined your Age Pension age, you will need to ensure you meet residency requirements.  The Age Pension rules state in order to receive an Age Pension you must have been an Australian resident for at least 10 years in total, and that on the day you claim Age Pension you must be an Australian resident and be in Australia.  There are some exemptions from this rule, for example, if you are a refugee you are exempt from the 10-year rule.

If you meet the age and residency requirement the next step is the ‘Assets Test’.   The assets test is the value of all the assets you own. Please note assets owned both inside and outside of Australia are looked at.  This is important as it determines if you are able to receive the Age Pension and how much you are able to receive.  The value of your assets is what you would get if you were to sell them at market value. There are some assets however which are exempt from the test; the Department of Human Services (DHS) has a full list of the assets which are excluded. Click here for more details

The final eligibility assessment for the Age Pension is the Age Pension income test.  This is an assessment of your income from all sources including financial assets such as your superannuation. This is done to work out how much your financial assets are worth from an as income perspective as any income received could potentially reduce your Age Pension. This is done using ‘Deeming’ rules. The deeming rules calculate the income from your financial assets based on a predetermined set of parameters.  The Deeming rule assumes your assets earn a set rate of income, irrespective of what they actually earn. 

Depending on your financial position, each of these measures may establish or deny your entitlement to an aged pension.

If you believe you meet the eligibility rules but are uncertain about certain tests such as the Age Pension income test it is always best to do further research.  The Department of Human Services webpage offers a great deal of information regarding the Age Pension.  Furthermore, if you currently have a financial adviser consider speaking with them as they will have a much clearer understanding of your finances and will be able to assist in determining your eligibility.

LifeTime Financial Group are specialist (holding appropriate accreditations)advisors who are ideally positioned to assist you.

Would you like to discuss your personal position further with one of our highly qualified financial planners? Why not call us today on 03 9596-7733. There is no cost or obligation for our initial conversation/meeting.

Written by Hugo Sampson of LifeTime Financial Group. A leading privately owned Melbourne based Financial Planning practice.