The lack of $100 notes in circulation cannot be blamed solely on retirees hoarding their cash.
Where have all the $100 notes gone? The Reserve Bank of Australia says that although there are plenty of $100 notes that have been issued, they are not being circulated.
A former Reserve Bank official believes part of the answer may be that retirees are stashing their cash at home and reducing the money they have in savings accounts and other investments to maximise the age pension.
The suggestion has outraged pensioner groups who say it casts "criminal suspicion" over two million Australians. But could it be true?
In a means-tested age pension, the payoff for being able to qualify for even a tiny part of an age pension is huge. Qualifying for even $1 a fortnight of age pension makes the retiree eligible for discounts on prescription medicines under the Pharmaceutical Benefits Scheme, medical services and other discounts. The age pension is subject to an income and an assets test.
Most retirees - especially women - are well under the maximum assets allowed to qualify for the full age pension. Average retirement payouts in 2009-10, the latest available, were $198,000 for men and $112,600 for women. Note that is the "average", with the median payout likely to be lower.
To receive the full age pension, a home-owning couple is allowed assets of up to $273,000. The upper limit is $1,032,500 for a home-owning couple (though there is also an income test).
Up to $10,000 a year can be "gifted", with it being counted under the assets test. There is a limit to how much can be gifted in any five-year period, of $30,000. Some retirees probably figure it is worth forgoing the 3.5 per cent or so that could be earned on the money at the bank if it means picking up, or continuing to pick up, a part age pension.
But don't discount the conservatism of many older Australians who just like the feeling of security of having cash on hand, even though having large wads of cash at home actually increases the risk of financial loss from a burglary or house fire.
A financial planner with WLM Financial Services, Laura Menschik, says many older retirees may not be able to get to ATMs or banks, and may not have access to the internet to pay for goods and services electronically.
They need more cash on hand than other people.
So there are reasons retirees may want to have cash on hand that does not include fiddling the welfare system.
"I have several clients receiving Centrelink benefits but I'm unaware if they keep excessively large sums of money at home other than to meet regular cash needs," Menschik says.
The key to maximising their Centrelink benefits is to take advice well before reaching pensionable age.
Centrelink only assesses assets that have been disposed of within five years of applying for the pension.
If someone wants to help out their children they may want to give assets to children at least five years before reaching pensionable age to maximise Centrelink benefits.
In the five years before receiving the benefit, Centrelink allows up to $30,000 to be gifted without it counting under the assets test.
Menschik says a large part of the explanation for the missing $100 notes could be the growth in the cash economy to facilitate the avoidance of income tax.
Those providing services directly to households often like to be paid in cash. Accounts running to thousands of dollars are not going to be settled in $10 and $20 notes.
The cash economy, gambling or illicit activities, such as the drugs trade, could be an even larger part of the answer than retirees' hoarding cash, if that is, in fact, what they are doing.
Frequently Asked Questions about this Article…
Where have all the $100 notes gone and what does the Reserve Bank of Australia say about missing $100 notes?
The Reserve Bank of Australia says plenty of $100 notes have been issued but many are simply not being circulated. The article notes several possible explanations for the missing notes, including retirees holding cash at home, growth in the cash economy (including tax-avoiding cash payments), gambling and illicit activity, and ordinary consumer behaviour that keeps high-denomination notes out of daily circulation.
Are retirees hoarding $100 notes to maximise their age pension?
A former Reserve Bank official suggests some retirees may be stashing cash to reduce reported savings and therefore qualify for larger Centrelink payments, but pensioner groups reject this idea as unfair. The article also points out that many retirees are well under the asset limits for a full pension and that there are legitimate reasons—like limited access to ATMs or online payments—why older people might keep more cash at home.
What are Centrelink gifting rules and how do they affect pension eligibility?
Centrelink allows up to $10,000 a year to be gifted, with a five-year look-back limit of $30,000 that counts under the assets test. The article explains that Centrelink only assesses assets that were disposed of within five years of applying for the pension, so gifting or transferring assets more than five years before pensionable age can affect eligibility calculations.
How much in assets can a home‑owning couple hold and still receive the full age pension?
According to the article, a home‑owning couple is allowed assets of up to $273,000 to receive the full age pension. The article also cites an upper assets limit of $1,032,500 for a home‑owning couple (noting there is also an income test involved).
Why might older Australians keep large amounts of cash at home despite the risks?
Many older Australians value the sense of security and convenience of having cash on hand—some may have trouble reaching ATMs or using internet payments. The article warns that while cash feels safe, holding large sums at home increases risks of financial loss from burglary or house fire.
Could the growth of the cash economy explain the shortage of $100 notes?
Yes. The article suggests that parts of the cash economy—businesses paid in cash for household services, gambling, or illicit trades—could be a significant reason high‑value notes are off the banking system and in private hands, possibly even more important than retirees hoarding cash.
What practical advice does the article give retirees who want to maximise Centrelink benefits?
The article recommends taking financial advice well before reaching pensionable age. It highlights that gifting decisions matter—gifting within five years of applying can be counted against you—so planning gifts or asset transfers at least five years ahead can help maximise Centrelink entitlements.
What should everyday investors take away from the debate about missing $100 notes?
Everyday investors can note that cash behaviour influences the broader economy: large quantities of high‑value notes being held outside the banking system can reflect genuine retirement preferences, gaps in electronic access, and an active cash economy. The article implies investors and advisers should consider practical risks of holding large cash balances and the policy implications of how cash and Centrelink rules interact.
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