Age Pension Payment Rates and Eligibility

Age Pension Rates and Asset and Income Eligibility Tests - Australian Residents

The Australian Government's Age Pension is designed to provide income support for eligible older Australians and is indexed twice each year, on 20 March and 20 September, to reflect changes in pensioner cost of living and wage increases. Eligibility is assessed on the basis of your age, residency status and an assessment of your income and assets.

Age Pension Rates from September 20, 2024 to March 19, 2025

Qualifying for an Aged Pension

To qualify for the Age Pensions, you must:

• Be an Australian resident and reside in Australia on the day that you lodge your claim (you also need to meet the 10-year qualifying Australian residence requirements), and
• Be of eligible age - with the eligibility age gradually increasing to 67 for both men and women, as per the table below:

Income and Asset Tests

Your age pension entitlement is calculated by reference to how much other income you receive (the "Income Test") and how much your assets are worth (the "Assets Test"). You can have a certain amount of income and assets and still receive the maximum rate Age Pension; but if your income or assets exceed certain thresholds then your Age Pension reduces on a sliding scale. Note that the Test that results in the lowest payment rate will apply.

Age Pension Income Test

Most types of income ("assessable income") are taken into account when determining your Age Pension entitlement, including:

• Financial investments (including money in super funds if you have reached age pension age);
• Employment income (if you are still working); including amounts salary sacrificed into super
• Income from sole trader or partnership businesses
• Distributions or dividends from private trusts and private companies
• Real estate income, including income from rental properties, boarders or lodgers
• Income from outside Australia, including non-Australian pensions

Some financial investments (eg. term deposits, shares, managed funds) are "deemed" to earn a certain rate of income, regardless of what they are actually earning. This is referred to as "deeming" and the rate has been very topical recently, given historically low interest rates).

Current Annual deeming thresholds and rates - effective from 1 July, 2024 - are as follows:

The Government announced in the 2024 Budget that social security deeming rates will be frozen at their current levels for a further 12 months until 30 June 2025. Without this freeze deeming rates could have been expected to increase quite significantly, as they broadly follow the cash rate, and led to a number of individuals seeing reduced pension payments.

Income Test Thresholds (Residents) effective September 20, 2024 - Fortnightly Income figures

Short example of how this works: The pension is reduced by 50c for every dollar of income per fortnight over $212 for single pensioners ($5,512 pa) and 25c for every dollar over $372 for couples ($9,672 pa). So, a single pensioner with an income of $1,000 per fortnight would be limited under the income test to the single rate pension of $1,144.40 less (($1,000 - $212) x 50%)) = ($1,144.40 - $394) = $750.40 per fortnight.

Age Pension Assets Test

The value of the various assets you own are taken into account when determining your Age Pension entitlement. Generally, the value of the assets is based on what you would receive for them if you sold them at market value.

Assessed assets include (but are not limited to):

• Real estate assets (excluding your principal home – unless it is used to conduct a business or it is on more than 2 hectares of land)
• Life interests (eg. where you transfer an asset to another person but retain an interest in the asset)
• Retirement village entry contributions – if you pay less than the threshold ( $242,000 as at 1/7/2023), you are considered to be a non-homeowner and your entry contribution is included in the assets test. The threshold is called the "extra allowable amount" (EAA) and is the difference between the asset limit for home owners and non-home owners
• Financial investments
• Superannuation investments (super owned by you or your partner is included in your asset test if the owner is over age pension age)
• Income streams
• Business assets
• Funeral investments (although there are a range of different funeral investments that may be either partially or fully exempt from the assets test)

Asset Test Thresholds effective September 20, 2024

Short example of how this works: The age pension is reduced by $3 per fortnight for every $1,000 above the requisite asset threshold. So, for a single, home owning pensioner with $500,000 in assets the pension is reduced by ((500,000 - $314,000)/1000) x $3 = $558.00 = Pension of ($1,144.40 - $558.00) = $586.40 per fortnight.

Determining whether you are entitled to a pension and to what amount can be complicated, and the above summary and scenarios are a useful guide but may not be all inclusive. We also have an Age Pension Calculator available to assist in determining your eligibility and entitlement to a pension.

Both the commentary above and our calculator should be read in conjunction with the information on The Australian Government's Department of Human Services website.

Note also there are several strategies you could consider which may help you optimise your income and asset base to ensure you are entitled to the maximum Age Pension possible.

If you would like to arrange professional advice in relation to the above matters, please complete the Inquiry form below providing details and you will be contacted accordingly. You will receive a fee quotation in advance of any advice or services being provided.