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.
Australian superannuation is funded by employers.
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.
Most Australian workers have their superfunds in a balanced superannuation fund. This means that 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 9.5 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 66 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 2019, the Age Pension is worth $21,993 a year for single people, and $33,066 a year for couples.
Supplements for people in need of income support can increase the aged pension to a maximum of $24,081 a year for single people, and $36,301 a year for couples.
From July 2019, the Age Pension qualifying age is 66 years. The qualifying age will continue increase by 6 months every 2 years, reaching 67 in 2023.
Australian Age Pensions are income and asset tested.
If you are single, and you own your own home, and you have other assets worth less than $258,500 you qualify for the full Age Pension.
For couples who own their own home the assets cut off is at $387,500.
If you are single, and you don’t own your own home, and your assets are worth less than $465,500 you qualify for the full Age Pension.
Couples who don’t own their home must have assets worth than less $594,500 to qualify for the full Age Pension.
A sliding scale operates after this. Pensions are reduced by $3 per fortnight for every $1,000 of assets more than the figures quoted above.
Effective from 20 March 2019, if a single person’s income (not including government age pension) is less than $172 per fortnight ($304 couples) they will qualify for the full age pension.
Income above these amounts reduces the pension payable by 50 cents in the dollar.
The Age pension entitlement reduces to $0 when a single person’s income (not including government age pension) reaches $2,024 per fortnight ($3,096 for couples).