Your guide to Centrelink and DVA Service Pension
- Retirement Planning
Once you have reached the ‘age pension’ age and, provided you meet basic conditions of eligibility, you may be entitled to receive a pension from the Commonwealth Government to assist you in supporting yourself in retirement. This guide covers:
- The basic conditions of eligibility
- The age pension age
- The assets and income tests
- Age pension entitlement
Basic conditions of eligibility
In order to be considered to be eligible for an age or service pension, you must meet some basic conditions.
These conditions include that:
- You are an Australian resident and in Australia on the day you lodge your claim, or
- You are eligible to claim an Australian age pension under an international social security agreement.
- In addition, you must generally have been an Australian resident for a total of at least 10 years, of which at least five years occurred in one continuous period.
However, exemptions to this residency requirement do exist for widows, recipients of a Partner Allowance and some classes of refugees.
If you believe that you may qualify for a residency exemption, you should discuss your circumstances with your financial adviser.
‘Age pension’ age
If you meet the basic conditions of eligibility, you will be able to apply for an age pension once you reach the pension age. Your pension age will differ depending upon whether or not you are a qualifying service veteran.
Qualifying service veterans
Department of Veterans Affairs members have a service pension age of 60 for both males and females (not planned to be indexed as with Centrelink pension age).
Other pensioners Age pension age for non veterans:
Your date of birth determines your Age pension age
|Date of birth between||Age eligible for age pension|
|1 July 1952 and 31 December 1953||65½|
|1 January 1954 and 30 June 1955||66|
|1 July 1955 and 31 December 1956||66½|
|1 January 1957 and 30 June 1958||67|
Note: The Federal government has proposed to further increase the age pension age from 1 July 2025 by six months every two years from age 67 to 70 by 1 July 2035. Individuals born before 1958 will not be affected by this change.
As of 20 March 2015, the maximum rate of age pension which you could be entitled to is:
|Status||Pension per fortnight*|
* Includes pension supplements and also the energy supplement
The actual amount of age pension that you will be entitled to will be based on the results of two tests: the assets test and the income test.
While the assets test determines the total value of assessable assets that you hold, not all assets that you own may be assessable.
Examples of assets which are non-assessable (i.e. excluded) from this test include:
- Your principal residence and up to 2 hectares of surrounding land
- Some types of superannuation pensions and annuities
- Aged care accommodation bonds
- Funeral bonds with a value of no more than $12,250
- Burial plots, and pre-paid funeral plan
If you are a member of a couple, the total value of both partner’s assets will be included in the assets test. The total value of your assessable assets will then be compared against assets test thresholds to determine your age pension entitlement.
The asset test thresholds that are applied will depend upon whether or not you own your own home.
Homeowner (effective 1 July 2015)
Non-homeowner (effective 1 January 2015)
Under the assets test:
- If the total value of your assessable assets is less than the ‘full pension threshold’, you will be entitled to receive the maximum rate of age pension
- If the total value of your assessable assets is equal to or greater than the ‘no pension threshold’, you will not receive any age pension
- If the total value of your assessable assets is between these thresholds, your age pension entitlement will be equal to the maximum rate of age pension, less $1.50 for every $1,000 of assets above the ‘full pension threshold’.
Simon and Alice are home-owners with assessable assets of $600,000. Under the assets test, their age pension entitlement would be calculated as:
= $1,296 – [($600,000 – $291,500) X $1.50 ÷ $1,000] = $833.25 pf (combined)
Under the income test, the total amount of income that you earn from all sources each fortnight is added together and the result is used to calculate your age pension entitlement per fortnight.
Income exemptions generally only apply to other Government assistance and periodic gifts or payments that you may receive from immediate family members.
|Single||$162.00 pf||$1,882.40 pf|
|Couple combined||$288.00 pf||$2,881.60 pf
Under the income test:
- If the total value of your assessable income is less than the ‘full pension threshold’, you will be entitled to receive the maximum rate of age pension
- If the total value of your assessable income is less than or equal to the ‘no pension threshold’, you will not receive any age pension
- If the total value of your assessable income falls between these thresholds, your age pension entitlement will be the maximum rate, less 50c for every $1.00 that your total assessable income is above the ‘full pension threshold'.
Case study (cont.)
Simon and Alice earn assessable income of $800.00 per fortnight.
Under the income test, their age pension entitlement would be calculated as:
= 1,296 – [($800.00 – $288) X 50c = $1,040 pf (combined)
For the purposes of the income test, the Government assumes that you will be earning a certain rate of return from certain types of investment assets that you may hold, regardless of the actual earning rate.
These assets are known as deemed assets and include:
- Debentures, bonds and term deposits
- Cash deposits and cash management trusts
- Listed shares and managed funds
- Superannuation and rollover funds, if you are at age pension age
- Account-based pensions purchased after 1 January 2015 (or for those account-based pensions purchased before 1 January 2015 where the individual was not in receipt of Income Support), and
- Some types of income streams with a term of less than five years.
The total market value of your deemed assets are added together and an income is deemed to be earned at the following rates:
|Status||Deemed earning rate||Deemed earning rate|
|1.75% pa||3.25% pa|
|Single||First $48,600 of deemed assets||All remaining deemed assets|
|Member of a couple (combined)||First $80,600 of deemed assets||All remaining deemed assets|
Age pension entitlement
Once your age pension entitlement has been calculated under both the assets and income tests, the actual amount of age pension to which you are entitled can be determined.
While your pension entitlement is calculated under the assets test and the income test, the test that produces the lower result will determine the amount of age pension you are entitled to receive.
Case study (cont.)
As Simon and Alice were entitled to an age pension of:
- $833.25 pf under the assets test, and
- $1,040.00 pf under the income test
Their actual age pension payments will be $833.25 pf (combined)
Increasing your age pension entitlement
There are strategies you can implement that can reduce the amount of your assessable assets or income so that your entitlement to the age pension increases.
You should contact your financial adviser to discuss whether any of these strategies are appropriate for your personal circumstances.