No age pension or a part age pension
If you receive a part age pension, there may be ways to increase the benefit you receive from the government. You can also use these tips to potentially increase your eligibility for a pension if you aren’t currently eligible.
The amount of age pension you receive is based on an income test and an asset test. This means that Services Australia assesses your income and assets to calculate if you’re eligible for the age pension.
You could boost your pension income by reviewing your assets, the ownership of assets and debt, and looking at other income.
Services Australia looks at the value of what you own, excluding your home. This includes cash, your Income Stream (or super) balance, a percentage of the value of any lifetime annuity you have bought, a caravan, a car, your household goods and so on. Services Australia uses the second-hand value or ‘fire sale’ value, not your insured or replacement value.
Periodically you should review the values you provided to Services Australia. Your home contents may be insured for a replacement value of $30,000, but they’re actually only worth $5,000 or $10,000 second-hand. Does Services Australia have that second-hand value? Or maybe your car was worth $40,000 new, which is the value you gave Services Australia at the time, but now it’s depreciated and is worth $15,000. Or, maybe your Income Stream was worth $750,000 when you started, but the value of it has now changed. Services Australia won’t automatically update the value of your assets. That’s something you need to do.
If you are divorcing or separating, there are things to consider regarding assets and the age pension. Read more in our article “Separation or Divorce and the age pension“.
Your younger spouse
If your spouse has not yet reached age pension age, you could use their super to boost your eligibility. Transferring some of your super to their super will exclude that amount from your individual age pension assessment. You may be able to move up to $330,000 into their super (conditions apply), therefore reducing your own super balance by that amount.
There is an annual limit of up to $110,000 (in 2023/24) that can be paid into a super account as a ‘non-concessional contribution’. However, you may use the bring-forward rule to bring forward the next 2 years’ worth of non-concessional contributions and pay that into your younger spouse’s super account this year too. The bring-forward rule could let you move up to $330,000 to their super. You’ll need to make sure that they haven’t already received money into their super as ‘non-concessional contributions’ if you’re going to do this.
You can find out more about non-concessional contributions on our website. Learn more in our videos: “Recontribution Strategies” and “Leaving your super to your non-dependants”. If you want to speak to us, book your free appointment.
Arrange your debts
Make sure you structure your debts appropriately. Your pension eligibility is impacted by having debt and how it’s structured.
If you have a debt for investment purposes secured against an investment asset, that debt could reduce the value of the investment asset for assessment purposes. For example, if you have a $300,000 investment property with a $200,000 investment loan against it, the loan reduces the assessable value of that investment property asset to $100,000.
The type of debt (whether investment or personal, such as a credit card or mortgage) and what it’s for impacts on eligibility. Paying down personal debt may help your position. You can find out more about how debt impacts the age pension from Services Australia.
Giving it away
You can’t simply give away everything you own for the purpose of reducing your assessable assets. Services Australia limits the amount you can give away to reduce your assets to $10,000 a year, or up to $30,000 over a 5-year period. They will also look back to see what you’ve given away in the past 5 years and count anything you gave away in those 5 years towards your assets.
If you plan to claim the age pension and you gift assets at least 5 years before you claim the pension, those assets won’t be counted towards your assessable assets.
Services Australia will let you spend money in a lump sum up to a year in advance to reduce your cash. For example, you could pre-pay for a big holiday a year ahead. Or you could pay now for a new kitchen installation next year. This will reduce your cash in savings now and therefore possibly increase your pension.
You could also pre-pay your funeral costs. There’s normally no limit to the spend on a pre-paid funeral with a funeral director for age pension asset-reducing purposes. Paying for this now will reduce your cash and therefore could increase your age pension. It could also provide your loved ones with peace of mind.
Note that there are exceptions and some advance funeral costs don’t reduce your assets. For example, you need to tell Services Australia about the value of any funeral bonds you own. Find more information about funeral bonds and prepaid funerals on the Services Australia website.
Go back to work
Along with looking at your assets, Services Australia also looks at your income when they assess your age pension eligibility. The income you receive from other sources (such as part-time work) may reduce your pension eligibility.
However, there is a Work Bonus you could use to offset income you earn from working. An eligible pensioner can earn up to $300 per fortnight with no impact to their age pension. If you don’t use your fortnightly $300, it’s saved up in a ‘work bonus income bank’ to a maximum of $11,800. Having that $11,800 work bonus may mean that you can take on a short period of work at a higher fortnightly income than the $300 limit without impacting your pension.
Even if you earn more than $300/fortnight, the Work Bonus reduces the income for income assessment by up to $300/fortnight.
You can read more about the Work Bonus on the Services Australia website.
Don’t cut your nose off to spite your face
(or, don’t damage your current situation just to maximise your pension)
While everyone wants to maximise their entitlements, it’s important to remember that receiving the maximum pension at the expense of your whole financial position isn’t ideal.
You need to keep your overall financial position at front of mind. If you earn an extra few dollars of pension or, for example, become eligible for cheaper medicine with a Health Care Card, but it costs you thousands of dollars in assets, you need to consider if it’s the right decision for you.
Is there another benefit or support you could receive?
You might be eligible for other benefits, including rent assistance, carer’s allowance or a Seniors Health Card. Use the Services Australia Payment Finder to find out.
Enter information about your situation to see the different benefits or support that you may be eligible for. You can also estimate the level of benefits you may receive.
The full age pension
If you are already receiving the full age pension, you can’t receive any more age pension each fortnight. However, you should still investigate your eligibility for other entitlements using the Payment Finder.
Find out more
If you want to speak to us about how your super income can work with the age pension, make your free appointment with us.
To learn more about the age pension, Services Australia’s website is the best place to start. You can also make an appointment with a Services Australia Financial Information Services Officer. Their service is free.