Age Pension Assets Test - THE TRUTH REVEALED! - YouTube

Well hello. Did you know that currently in Australia there are well over 4 million retirees?  

25% of those retirees are drawing a full Age Pension with approximately 7% not having any additional personal income.

That is tough, but majority of retirees receive part Age Pension and providing you have optimized your Age Pension entitlement, 

you have maximized benefits of your private income stream, you might feel your income is OK.

The problem that I often see is that most retirees  on part Age Pension and those with no Age Pension support at all,

do not really know the reason for reduction or removal of their entitlement.

This is actually a very important piece of information.

You should know precisely if you are missing out on your entitlement because of Asset Test - meaning you have too much assets,

or on the Income Test - meaning your income is too high.

Unfortunately many retirees accept Centrelink decision as final, and never really question their eligibility or even inquire or receive advice.

Maybe there is a way to improve your situation.

Maybe there is a way to optimize your Age Pension entitlement.

And maybe we can improve your income from your private financial sources.

But in order to do this on your own, you really need to know  the rules and which test affects you the most.

Is it an Income Test or is it an Asset Test and why? And everyone's circumstances are different.

This is why I"ve created the video "Age Pension explained".

You have to start from the basics, and this video explains all details of eligibility for the actual benefit,

and then goes on to more details about limits of Income and Assets tests.

But unfortunately this topic is much bigger than one video can explain, therefore today we will concentrate just on Assets Test,

and in my future video I will cover all you need to know about Income Test.

If we've never met before my name is Katherine from About Retirement. I'm Certified Financial Planner, Money Strategist and Retirement Planner.

I love, love, love, love, love talking about retirement. This is my little niche, and I really want to help you organize your savings

in the most optimized way, so you can enjoy the highest possible income from the government, while setting up your own savings,

to supplement your income safely, securely, and for life - no matter what the market is doing or what life throws at you.

As I said before, today we will go deeper into Assets Test, and discuss accessible assets included in the test and how it is calculated.

But for now let's go back a little bit in the history. This is important!

In January 2017, the government introduced the Fair and Sustainable Pension Bill,

which was advertised as a major review of Age Pension system, especially Assets Test.

The official version was that the government wants to assist  pensioners and improve their quality of life.

At that time the Asset Threshold for full Age Pension benefit was increased by $171,500.

Therefore more retirees became eligible for full Age Pension payment.

To be exact, 50,000 part pensioners started receiving the full Age Pension and this is exactly what the government was advertising,

to prove how much of the assistance it is providing to Australian retirees.

And I'm not disputing, that was a fantastic news for those 50,000 retirees.

But, but, at the same time another change was introduced, and that change was not advertised at all. I wonder why?

So, any assets above those thresholds limits were no longer being reduced by $1.50 for every $1,000 above the threshold,

but by $3.00, therefore the cutoff point happened at the much lower asset levels.

Due to this change 236,000 pensioners had their Age Pension reduced,

and over 90,000 lost Age Pension altogether.

And that's in 2017. That has a flow on effect from 2017 till today.

The government graciously allowed all pensioners who lost their benefit to be automatically eligible

for Commonwealth Seniors Health Card as a compensation regardless of the level of income earned.

The outcome of this helpful change for pensioners saw a reduction of the expense for the government

by 2.4 billion dollars, over the period of the following 4 years. 

Not bad is it?

So let's now review the actual current Asset Test limit.

If you are a single homeowner, you are eligible for full Age Pension up to $268,000 of your assets.

If you have assets above $585,750 no more Age Pension for you.

If you are a single non-homeowner, you're eligible for full Age Pension if your assets are below $482,500,

and you will lose eligibility for Age Pension, if you have assets more than $800,250.

A couple homeowners, you will get full Age Pension if your assets are below $4001,500,

and you will lose Age Pension if you have assets above $880,500.

And a couple non-homeowners, you have full Age Pension  if your assets are below $616,000,

and you will lose Age Pension, part Age Pension, if your assets are above $1,095,500.

So exactly, what type of assets are included in the Assets Test?

Let's start with personal effects.

Obviously your motor vehicle - this is your market value of your car, your bike, or whatever you have.

Your household contents. And please remember, it is not the insurable value of your contents,

therefore not the value that is listed on your contents insurance policy.

Centrelink wants to know your replacement value of your contents, so the value if you were to sell your possessions.

In most cases, the value between $5,000 and $10,000 is acceptable, so don't overdo it.

And then you have to disclose any boats, caravans, maybe antiques, jewelry, any assets of sellable value.

And now let's talk about financial assets that need to be included in  the Assets Test.

Superannuation accounts.

If you are a couple and both of you are of Age Pension age, all of your superannuation accounts will be counted under Asset Test.

If one partner is below the Age Pension age, then the superannuation funds  of that partner will be exempt under Asset Test.

So this is a little hint for you. If based on age only one person is eligible for Age Pension,

and you want to receive the highest benefit, keep as much of your family assets,

your financial assets, within your spouse's superannuation fund, to reduce any assets under Assets Test. 

Income Streams form part of Assets Tests, so for example, a pension income stream such as account based pension.

Those types of income streams carry a very special treatment under Income or Assets test depending on commencement date,

so please take care when providing information to Centrelink. And if in doubt, receive advice.

Annuities - annuities are another form of income stream for retirees, and those can create lots of problems for you to discover the actual asset value.

As annuities have changed over the years they could have very juicy exemption for calculating asset value or income in full or in part.

It is very important for you to understand those annuities, as otherwise you might miss out on a big benefit you may not even know is available for you.

And obviously all other financial investments   such as cash in the bank, term deposit.

And please check if you have any life insurance that has  a surrender value, as this will also form part of the Assets Test.

If you own any shares - in public, publicly listed companies or unlisted shares or maybe shares in private companies, 

those are also included in Assets Tests.

And here is another type of asset - cryptocurrency.

I have not met a retiree who actually owns those assets, so if you do, if you do have this investment,  

please let us know in the comments below this video I'm really curious.

So right now, let's talk about Real Estate.

Obviously Real Estate is included in the Assets Test, but it excludes your family home up to the first 2 hectares of land it is on.

Please keep in mind that if you live on the farm, your property might be assessed differently.  

My recommendation really is: Get correct advice before going speaking with Centrelink office.

If you have a Granny Flat that is on the land you do not own, that might be included under Assets Test,

so if you are thinking about granny flat arrangement, for example live closed with your kids on their land,

please get a proper advice before going ahead and doing that, as your Age Pension may suffer.

Obviously any property that you rent out is included under Assets Test,

any property that is vacant, for example your holiday home or unused land.

Sometimes I get asked: Well, if I have 2 properties, one is worth $1MIL, the second one $500,000

but I spend sort of 50/50 time between them, can I actually choose which property I use as my family home?

If this is the case, and you truly spend similar periods of time in each property, then of course advice Centrelink of the higher value property

as your family home. You can only have one family home.

And the other property will be valued under Assets Test  but at least in this instance you have a choice.

If you own a property and you let another person  to live in it for free it is still subject to Assets Test.

A very common question that I get is: If I own an investment property valued $700,000

and I have a loan against that property of let's say $500,000   

under Assets Test, is my property valued at $700,000 or $200,000?

The answer is that Centrelink will look at the NET value of your property,

so the value after any outstanding debt being deducted from the total value, hence this property in this example under Assets Test would be valued at $200,000.

Just please make sure you get an advice if holding such a property during your retirement is actually beneficial for you  

and for your overall income needs, and not just for the outcome of the Age Pension. 

If you live in a Retirement Village, whether you are classed as a homeowner or not

and whether the value you paid to Retirement Village is included  or excluded under Assets Test will really depend  

on how much you actually paid as your Entry Contribution.

This will need to be explained in another video, so please let me know in the comments below this video if this is the topic of your interest. 

So now let's talk about Gifting.

There is a limit in gifting of $10,000 in one financial year, but it cannot be greater than $30,000 over the period of 5 financial years.

Any assets that you gift above that value, is included in the Assets Test, even  if you do not own this asset any longer.

There are some exceptions that are quite important to know, but it could be a topic for another video.

And right now let's talk about assets that are owned not on your name but you control them.

Well years ago it was very easy to legally hide assets from Assets Tests.

Lots of people back then had private trust that they used to control

and any assets that were within the trust, the trust was the actual legal owner of those assets.

Therefore at that time, because assets were not on  your personal name, they were not counted under Assets Test.

Well times have changed and now this will no longer work, as Centrelink is calculating not only the assets that you own but also assets that you control.

And this could be within a trust or a company structure.

If this is you, really you need to speak to a specialist in this area and get good advice.

if you run a business while being a retiree, any business assets could also be included under Assets Test.

Here it is we have gone over all necessary details of Assets Tests.

If you enjoy this video, please give it THUMBS UP and please SUBSCRIBE to my channel so you know of the next video that will be coming out next week.

And please, let me know in the comments:

What was your biggest surprise? Any unexpected information? or

Do you actually feel a little bit more comfortable about Assets Tests after having listened to this video?

If yes I'm really, really glad it helped.

If on the other hand you think Age Pension and Retirement Planning are just too complex, but you still want the best income and investment outcome,

feel free to check out my website AboutRetirement.com.au or contact me directly.

All details are listed in the description below this video.

And next time, we will be talking about what assets are excluded from Assets Tests.

Before you go, I invite you to view those videos: "Age Pension explained" - all basics you need to know about eligibility rules for Age Pension benefit.

The second is the list of videos created specifically for your superannuation assets, and how to best prepare your assets for your anticipated retirement.

see you next time