Australians often apply for the Age Pension well after the time they become eligible, on average about 2.3 years after.¹ It is estimated that single retirees are losing an average of $37,000 in Age Pension entitlements due to delays in applying for the Age Pension while couples are estimated to lose close to $60,000.ᵃ
Improving your government entitlements and benefits
Many retirees look for ways to make their money last longer or improve their government entitlements and benefits. Eligibility for various Government related benefits, income and pension support payments and the level of residential aged care fees, often involve assets and income tests, also commonly referred to as the ‘means test’.
The ability to qualify for government benefit payments, such as the Age Pension for example, also provides ancillary benefits including reductions in local council rate fees, reduced vehicle registration costs and access to cheaper medicines under the pharmaceutical benefits scheme. These benefits have the potential to represent significant savings for you every year in retirement.
Assets test
Under the assets test, generally the net market value of your assets is used (i.e. the amount the assets can be sold for less any debts that are secured against the assets).
All assets owned by you and your spouse are assessed, including most investment assets (such as, shares, managed funds, superannuation and investment properties) plus personal assets such as, motor vehicles and home contents.
Interests you have in trusts or private companies may also be included. Importantly, the assets test does however, exclude your principal place of residence and some other assets are also excluded.
Income test
All income attributable to both you and your spouse/partner is considered. How income is determined will depend on the nature of the income or your investments.
Under the ‘deemed’ income test, prescribed deeming rates are applied to the value of a financial asset to determine its ‘deemed’ income, instead of its ‘actual’ income. This applies to most financial investments such as, cash, shares and account-based superannuation pensions purchased on or after 1 January 2015.
Pension payments
Payments made either by Centrelink or the Department of Veterans’ Affairs are generally subject to income and assets testing. For example, you may be entitled to a part pension if your assets and income (including deemed income on financial assets) don’t exceed the upper thresholds for both tests, as well as meeting other eligibility requirements.
If your assets and income don’t exceed the lower thresholds for both tests you may be entitled to a full pension. Both the income and assets test are used to determine the amount of payments you receive. Your actual entitlement will be the lower of the amounts calculated under both tests.
Aged care & home care
The Australian government subsidises aged care homes and home care packages to provide affordable and accessible care.
The amount of government assistance will be based on an assessment of your ongoing care needs. For residential aged care, an assessment of your capacity to pay is undertaken based on your assets and income, while for home care, only your income is assessed.
Improving pension entitlements
Working with your financial adviser to help qualify or part qualify for government entitlements and benefits is an important step in securing your financial future. There are several strategies and solutions that may help you achieve your financial goals and help you qualify for a part pension or increase the current level you receive.
When considering any potential strategies or solutions it is important to consider whether your savings can support any shortfall in your retirement income needs. Your personal circumstances may also change and increase your need or reliance on your future savings.
With that in mind, there are a number of financial solutions to help you achieve your financial goals and may also boost your Age Pension or other government entitlements.
