75% of Australians of pension age receive the age pension – be it a partial or full pension.
Age Pension
You don’t automatically receive the age pension when you hit a certain age. You need to actively apply for this government-funded benefit by submitting the relevant Centrelink forms to Centrelink. Centrelink is part of the Department of Human Services of the Australian Government.
To qualify you need to meet four conditions.
1 – You need to be of pension age.
2 – Be an Australian resident for social security purposes.
3 – Pass the income test.
4 – And pass the asset test.
# 1 Pension Age
The first condition is that you must be of pension age. Your pension age depends on your date of birth and is :
65 years if born before July 1952
65 years and 6 months if born July 1952 to December 1953
66 years if born 1954 to June 1955
66 years and 6 months if born July 1955 to 1956
67 years if born in 1957 or later.
If you are a woman born before 1949 your pension age is even lower than 65 years.
# 2 Australian Resident
The second condition is that you need to be an Australian resident and must reside in Australia on the day you make your claim.
An Australian resident is an Australian citizen or a permanent visa holder or a protected Special Category visa holder from New Zealand.
The rules around residency tightened on 1 July 2018 when the Enhanced Residency Requirements for Pensioners came in. Under these new rules you now need to prove 15 years of continuous Australian residency when applying for a new age or disability support pension, unless you meet one of the following two exceptions.
You either had 10 continuous years of Australian residency including at least 5 years between age 16 and pension age.
Or you had 10 continuous years of Australian residency and proof you have not received activity tested income support for cumulative periods of five years or more.
Existing Exemptions
Existing exemptions will stay the same. So you don’t need to meet these residency requirements, if you are receiving a widow, widow B or partner allowance when reaching pension age. Or if you are or were a refugee. Or if you are a woman and your partner died while you were both Australian residents, provided you were an Australian resident for at least 2 years before your application. But we do shake our heads at this one. Why only if you are a woman? What about a stay-at-home dad whose late wife was the bread winner?
Before July 2018
Before July 2018, the residency rules were more lenient. You needed to have been an Australian resident for at least 10 years. But these 10 years didn’t have to be continuous. You were able to add up the years over multiple stays, provided one of those stays was at least 5 years.
Australia has a social security agreement with over 30 countries. If you reside and/or work in one of these countries, you might still count as an Australian resident for social security purposes thanks to the special rules in these agreements.
# 3 Income Test
To be an eligible individual you must satisfy two tests: an income test and an asset test. And you need to pass both tests to qualify. The test that delivers the lowest amount of entitlement is the one that will determine your entitlement.
The income test assesses your fortnightly income against thresholds set by the government. If your fortnightly income exceeds the full income threshold, then your entitlements are gradually phased out down to a cut-off point.
The thresholds vary depending on your family status, living arrangement, disability and other factors.
Deemed Income
If you own financial assets (such as shares, term deposits or since 2015 super), then the income test doesn’t actually use the actual income earned from these assets. Instead the test uses deemed income.
Deemed income is when you assume a rate of return even when that rate isn’t necessarily what you actually earn on your investment.
Work Bonus
If you choose to work while on the age pension, then you are entitled to a Work Bonus. This bonus is $250 per fortnight and works like an offset in the income test. You can accumulate unused work bonuses up to a certain threshold.
# 4 Assets Test
For the assets test you determine the value of your assessable assets less any relevant debt against set asset thresholds. The test looks at your assets worldwide but then grants you certain exemptions, for example for your home.
An asset is essentially anything you own which has monetary value and can be converted into cash – no matter how liquid or illiquid the asset might be. But certain assets and asset classes are exempt from the test.
If your total assets are below a threshold, you pass the asset test. If they exceed the threshold, your entitlements are phased out down to a cut off point.
Timing
You only become entitled to the age pension from the date Centrelink receives your claim form and all supporting documents. So if money is really tight, make sure you have all your papers ready before your pension age birthday.
So these are the four conditions to qualify for the age pension. If you have a question, please reach out to us. There might be a simple answer to your query.
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Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.
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