Superannuation and Pensions in Australia
Asset Test | Income Test | Tax Free Superannuation | Qualify for Australian Pension
How Do I get a Pension in Australia?
There are two chief sources of retirement income in Australia. These are:
• Superannuation, paid for through employment-related contributions.
• The Age Pension, funded by taxpayers and paid to you by the government.
Superannuation
Australian superannuation is funded by employers.
Employers must pay a minimum of 9 percent of every employee’s ordinary time earnings into a compulsory retirement fund. The fund must be registered with and approved by the Australian Government.
Some employers pay your salary and, separately, make an additional payment into the fund. Others will deduct the payment from your “remuneration package”.
When you compare packages from different employers you need to be clear which approach is being followed.
Over three-quarters of Australian workers have their superfunds in a balanced superannuation fund. This means two-thirds of their retirement money is invested in the world’s stock markets.
Superannuation funds are not final-salary schemes, so your income when you retire is dependent on the performance of your funds. Many workers rebalance their funds, moving their money into less volatile investments, when they are nearing retirement.
In addition to your employer’s 9 percent contributions, you are also free to add money to your fund.
For most people, superannuation supplements the Government’s age pension and provides them with additional income in retirement.
The Age Pension
To qualify for an Age Pension in Australia, you need to have reached 65 years of age and you normally need to have lived as a resident or citizen of Australia for at least 10 years.
Effective from 20 March 2011, the Age Pension is worth $17,443 a year for single people, and $26,296 a year for couples.
Supplements for people in need of income support can increase the aged pension to a maximum of $18,962 a year for single people, and $28,584 a year for couples.
From July 2017, the Age Pension qualifying age will increase from 65 to 65.5 years. The qualifying age will then increase by 6 months every 2 years, reaching 67 in 2023.
Australian Age Pensions are income and asset tested.
Asset Test
If you are single, and you own your own home, and you have other assets worth less than $181,750 you qualify for the full Age Pension.
For couples who own their own home the assets cut off is at $258,000.
If you are single, and you don’t own your own home, and your assets are worth less than $313,250 you qualify for the full Age Pension.
Couples who don’t own their home must have assets worth than less $389,500 to qualify for the full Age Pension.
A sliding scale operates after this. Pensions are reduced by $1.50 per fortnight for every $1,000 of assets more than the figures quoted above.
Income Test
Effective from 20 March 2011, if a single person’s income (not including government age pension) is less than $146 per fortnight ($256 couples) they will qualify for the full age pension.
Income above these amounts reduces the pension payable by 50 cents in the dollar (single) or 25 cents in the dollar each (for couples).
