THE value of superannuation affects a person's eligibility for the age pension under both the asset and income test depending on their age and whether they have started taking a pension from the fund.
Q My husband is eligible for a pension in August I draw a $400-a-month pension from my superannuation fund, which is an industry fund. Is my pension counted as his income when he applies for the age pension?
ASuperannuation is counted by Centrelink when a person is eligible for the age pension. For males this was originally 65 and for females it was 60. Changes have been made so these age limits will be 67 for everyone born after December 31, 1956.
For males born after June 30, 1952 the qualification age increases from 65 to 67 in half-yearly increments. For females the pension age is currently 63.5 for those born before January 1, 1946 and increases to 65 for those born between January 1, 1949 and June 30, 1952. After July 1, 1952 it increases to 67 for females in the same increments as for males.
Once a person reaches age pension age both the assets and income tests are applied. Before then the value of super is not counted as an asset. Your super can be counted under the income test.
Q I am 61 years old and have not been able to work for the past five months because of illness. My working days may be over and I have applied for a disability pension due to my incapacity. I have $100,000 in super in my own self-managed fund that at present is just sitting in the bank.
Can I legally leave this money in the bank at a good interest rate and use the money from the interest like a pension to supplement my disability pension? I have researched several super funds to roll the money into and the fees really eat up any good benefit, which is why I am considering the bank.
AAs you have a self-managed fund the regulatory body you are accountable to is the Tax Office. You can leave your money in your fund earning interest and take the income as a pension as long as it meets the minimum payment standards. The pension you take will be counted as income by Centrelink. The actual amount counted will be the gross pension you receive decreased by the purchase cost of the pension.
Q My husband and I were born in 1966 and have a small business. Will we be able to retire and get the pension when we turn 60? We have no super as we have always put our money back into the business or our house. Will we be able to have our home and a small holiday house close by?
AYou will not be eligible for the age pension until you are both 67. The amount of pension you receive will be affected by the income test and the assets test. Your home will not be counted as an asset but the value of your holiday home and all other assets will be. These other assets include your cars and household furniture. The full pension is paid to a couple with assets up to $252,500 and the pension cuts out with total assets of more than $975,500.
Questions can be emailed to max@taxbiz.com.au
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Frequently Asked Questions about this Article…
How does superannuation affect my age pension eligibility under the income test and assets test?
The value of your superannuation can affect your age pension under both the assets test and the income test — but when it’s counted depends on your age and whether you’ve started taking a pension from the fund. Once you reach age pension age, Centrelink applies both tests. Before pension age your super is not counted as an asset, though it can be assessed under the income test.
If I get a regular super pension payment, will it count as my partner’s income when they apply for the age pension?
Yes. When your partner applies for the age pension and is eligible, Centrelink counts superannuation and any pension payments under the income test. A regular payment (for example, $400 a month) paid from your super would be assessed as income in the age pension means test.
What is the current age pension age and who will need to be 67 to qualify?
Pension age has been increasing. Historically it was 65 for men and 60 for women, but changes mean the age pension will be 67 for everyone born after 31 December 1956. The increase is phased: males born after 30 June 1952 move from 65 to 67 in half‑year increments, and females face a phased rise (the article gives current milestones such as 63.5 for some cohorts and increases to 65 or 67 depending on birth date).
If I’m under pension age, does Centrelink include my superannuation in the assets test?
No. Before you reach age pension age your superannuation balance is not counted as an asset for the assets test. However, Centrelink can still assess income from your super under the income test.
I have a self‑managed super fund (SMSF). Can I leave the money in the fund earning interest and use that interest like a pension?
Yes — if you have an SMSF you can leave money in the fund earning interest and take the income as a pension provided the payments meet the minimum pension‑payment standards. Your SMSF is regulated by the Tax Office, and any pension payments you receive will be assessed by Centrelink.
How does Centrelink count the pension payments I take from my super for means‑tested payments like a disability pension?
Centrelink counts the pension you receive from your super as income for means‑tested payments. The amount Centrelink assesses is the gross pension you receive reduced by the purchase cost of the pension, which can affect payments such as a disability pension.
Will my family home and a holiday house be counted under the age pension assets test?
Your principal family home is not counted as an asset under the assets test. However, a holiday home and all other assets — including cars and household furniture — are counted and will affect your age pension entitlement.
What asset limits affect the full age pension for a couple and when does the pension stop?
According to the article, a couple can receive the full pension if their total assessable assets are up to $252,500. The pension is phased out and cuts out completely when a couple’s total assets exceed $975,500. Asset levels between those points reduce the pension amount under the assets test.
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