Question 1: If a couple sell their individual homes for $500,000 each and buy together for $800,000, releasing money assets if that’s all they have, will this affect their pensions?
Question 2: I am an aged pensioner. If my wife, who is also retired and is under pension age, commences to draw on her accumulation phase superannuation to supplement our income, will her total superannuation balance commence to be treated as an “asset” in the aged pension asset calculation, because if so it will kick me off the aged pension?
Answer: The preceding two questions relate to Centrelink’s asset test assessment for couples, so I will answer both together.
When you are in receipt of an age pension, Centrelink applies both an asset test and an income test.
Whichever gives you the lower amount is the test that is used.
But note that this can change over time if your circumstances change.
Most retirees that don’t have any employment income or don’t receive income from a defined benefit superannuation scheme, are ‘asset’ tested.
As at March 2021, a couple who own their own home can have $401,500 in assets and receive the full age pension, and up to $876,500 and still receive a part age pension. These figures do not include the value of your principal residence.
For non-home owners, the figures are $616,000 for the full pension and $1,091,000 for a part pension.
If you are a member of a couple, for age pension purposes all assets are added together for the assets test, regardless of whose name they are actually held in.
A couple can only ever have one principal residence exempt from the asset test. So, in your situation, either $500,000 is already being counted, or you are a newly formed couple and $500,000 will shortly be counted under the asset test.
Your new home of $800,000 will now be asset (and income) test exempt and the residue of $200,000 will now be included in the asset test, assuming this extra cash is now just sitting in your bank accounts.
In terms of super, this becomes assessable under the asset and income test once you reach age pension age.
Super also becomes assessable if you cash it out and put it into a bank account or another type of investment, or if you transfer it into a super income stream or pension, which you have indicated is something your spouse may do.
Quite often we see the younger spouse leave their money in super until they reach their age pension age so as to not affect the age pension entitlements of the older spouse.
Alternatively, the younger spouse may start a super pension with only part of their super, so it has no, or just a minimal effect, on the age pension of their partner.
The optimum amount to start a pension will be based on your overall level of assets and personal circumstances.
As well as property and super, Centrelink will include all of your assets in the asset test. Therefore, it is important to look at your entire situation together and not base any decision on one type of asset.
Centrelink can provide you further information, or a financial adviser can provide you with personalised financial advice on these matters.
Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services
Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.
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