Roughly 2.6 million Australians receive it, and that number is expected to increase as the average life expectancy goes up.

If you’re approaching retirement, you might be wondering if you’re eligible for the Age Pension and, if so, how much you can receive. Below are some of the things Centrelink will consider when you apply.

Who can receive the Age pension?

The age at which you become eligible to receive the Age Pension has been gradually increasing from 65 to 67, as shown by the table below.¹

Whether or not you’re eligible for the Age Pension will also depend on your residency status. Generally, it’s only available to Australian residents who have lived in Australia for at least 10 years (at least five of those years must be continuous) and were in the country on the day the claim is lodged.

There are a small number of exceptions to these requirements — for example, if you have a qualifying residence exemption or are a resident in a country with which Australia has an International Social Security Agreement.

How much can you receive?

The amount of Age Pension you can receive will depend on your income and assets, as well as whether you’re single or part of a couple. The normal rates from 20 September 2023 are shown below.²

To maintain their value against increases in the cost of living, the Department of Social Services indexes these rates twice a year using the higher of the Consumer Price Index or the Pensioner and Beneficiary Living Cost Index. They may also be increased further to meet a wages benchmark.

Income and assets test

The Age Pension is means tested, so Centrelink will consider any income and assets you might have when determining how much Age Pension you’re entitled to receive. The hope is that older Australians will rely on the safety nets they’ve built up over the years before turning to the one provided by the social security system.

Two tests will be applied — the income test and the assets test — and you will be paid under the one that produces the lower rate of payment.³

The income test lets you receive income up to a certain limit before your Pension is reduced. For singles, the Pension is reduced by 50 cents for every dollar earned above $204. Meanwhile, couples’ combined pensions are reduced by 50 cents for every dollar earned above $360. This applies to all income sources, including superannuation and investments.

Meanwhile, the assets test considers any property (excluding your main residence) and possessions you own, regardless of whether they are held in Australia or another country. Depending on your relationship status and whether you own your home, the amount of Age Pension you can receive is reduced if the total value of your assets exceeds a certain amount. The limits are shown below.

Your payment might also be affected if you choose to give money away above a certain value. Under current rules, singles and couples can gift up to $10,000 in a financial year and up to $30,000 over five financial years without their Age Pension payments being affected. Excess amounts, however, will be subject to the income and assets test.

Work Bonus

For those who have an opportunity to re-enter the workforce, the Government has policies in place that allow you to earn income up to a certain point without it affecting the Age Pension you receive.

Under the Work Bonus, the first $300 of fortnightly income you receive from work won’t be counted as part of the income test.⁴ If you earn less than $300 per fortnight, unused amounts will accrue in a Work Bonus income bank up to $11,800. This can be used to offset future income.

Just keep in mind that the $11,800 limit represents a temporary increase that will only apply until 31 December 2023. After that, it will revert to $7,800.

If you or your partner start any paid work while receiving the Age Pension, you won’t have to apply for the Work Bonus, but you will have to start reporting how much you receive from work to Services Australia. This can be done over the phone or using the Service Australia website, or in person at a Centrelink office.

Sources

1 https://www.servicesaustralia.gov.au/who-can-get-age-pension?context=22526

2 https://www.servicesaustralia.gov.au/how-much-age-pension-you-can-get?context=22526

3 https://www.dss.gov.au/seniors/benefits-payments/age-pension

4 https://www.dss.gov.au/seniors/programmes-services/working-after-pension-age 

As always, 1 July brings with it a number of changes in the tax, super and financial landscape. Some were first outlined in the 2023-24 Federal Budget in May this year, while others have been in the pipeline for much longer. Here are some of the main changes you should know about going into the new financial year.

Increase to the superannuation Transfer Balance Cap

The general Transfer Balance Cap (TBC) — which is the maximum amount of super that can be transferred into a retirement phase account — has been increased from $1.7 million to $1.9 million.

If any transfers to your pension account exceed this limit, you may have to take the excess money out of your pension account (either by withdrawing it or transferring it to an accumulation account) and pay tax on any earnings related to it.¹

The increase could have implications for anyone planning to commence a retirement phase pension or those who haven’t yet fully utilised their TBC. If you already have a retirement phase income stream on 1 July, you will have your own personal TBC (and receive only a portion of the $200,000 increase), which you can find using the myGov online portal or by contacting the ATO.

Super Guarantee bumped up to 11%

The Super Guarantee increased from 10.5% to 11% on 1 July, meaning your employer will be putting a slightly larger percentage of your salary into your super. It will continue to increase by 0.5% each year until it reaches 12% in 2025.

Minimum pension drawdown rates revert to pre-COVID levels

On 1 July, the Government ended the 50% reduction in minimum account-based pension drawdown rates. It had introduced this in 2020 to help retirees better manage their finances during the tumultuous pandemic period. Now that the minimum percentages have reverted to pre-COVID levels, retirees should consider re-examining their investment strategies to make sure they can accommodate the higher drawings.

Here are the minimum drawdown rates that apply in the 2023-24 financial year:

Increase to the eligibility age for Age Pension

On 1 July, the eligibility age for the Age Pension was increased to 67 for Australians born on or after 1 January 1957. Previously, the eligibility age was 66 years and 6 months.

Income thresholds go up for Medicare Levy Surcharge and Private Health Insurance Rebate

The income thresholds used to calculate the Medicare Levy Surcharge have gone up for the first time in eight years. As of 1 July 2023, individuals earning more than $93,000 and couples with a combined income higher than $186,000 (plus $1,500 for each dependent child after the first child) will face the Medicare Levy Surcharge if they don’t have private hospital cover.

This also means that individuals earning less than $144,001 and couples with a combined income lower than $288,001 (plus $1,500 for each dependent child after the first child) can receive the Private Health Insurance Rebate for their private hospital cover premiums.

Low- and middle-income tax offset draws to a close

The Government hasn’t announced any changes to tax rates or income thresholds for the 2023-24 financial year. As scheduled, the low- and middle-income tax offset (LMITO), which offered tax relief to Australians earning less than $126,000 per year, will not be reinstated. The tax offset was rolled out as a temporary measure in the 2018-19 financial year but was extended three times to ease cost of living pressures during the pandemic. Its expiration is expected to affect more than 10 million Australians.

Looking forward, the Labor government also plans to go ahead with the stage three tax cuts, which were passed by the Morrison government back in 2019. Due to come into effect July 2024, the cuts will abolish the 37% tax bracket on incomes between $120,000 and $180,000 and flatten the tax rate for those earning between $45,000 and $200,000 to 30%.

Eligibility for the Home Guarantee Scheme proposed to be expanded

Starting July 2023, the government has proposed that eligibility for the First Home Guarantee and the Regional First Home Buyer Guarantee will be expanded to include friends and family members. Currently, only spouses and de facto partners can apply. The two schemes are also proposed to become available to non-first home buyers, on the condition that they haven’t owned a property in Australia in the last ten years and that they are permanent residents (rather than just citizens).

Additionally, the Family Home Guarantee — which lets eligible single parents purchase a home with a deposit of as little as 2% — is also proposed to become available to legal guardians of children.

Cheaper childcare available for families

On 10 July, the Child Care Subsidy rates were raised from 85% to 90% for families on a combined annual income of $80,000 or less. For families who earn more than that, the subsidy rate will decrease by 1 percentage point for every additional $5,000 of family income until it reaches 0% for families earning $530,000. The higher subsidy rates are part of a $55.31 billion package to help reduce childcare costs for Australian families over the next four years.

For more information about these changes, visit the relevant government website or consider speaking to a qualified financial adviser, who will be able to explain how they might affect you and your financial goals.

Sources

1 https://www.ato.gov.au/Individuals/Super/In-detail/Withdrawing-and-using-your-super/Transfer-balance-account/