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Demystifying the Pension Assets Tests

A pension is not the "be all and end all" of succession planning; however it can be a useful tool. Anyone engaged in succession or estate planning should investigate whether or not they are entitled to receive any Centrelink entitlements or assistance.

When looking at your options regarding the pension it is highly recommended to engage expert advisors to look at your individual circumstances. There are however a number of key issues which are highlighted below.

Pension Age

  • Men and women are eligible at age 65.
  • For both men and women born on or after 1 July 1952, see table below.

People Born Between

Eligible for Pension at age

1 July 1952 and 31 December 1953


1 January 1954 and 30 June 1955


1 July 1955 and 31 December 1956


1 January 1957 and later


Income and Assets Tests

A summary of the assets and income test is set out in the publication News for Seniors, which is accessible on line at: www.humanservices.gov.au/customer/publications.

  • The biggest issue to qualify for an aged pension is satisfying Centrelink’s income, assets and age tests. Essentially the tests provide certain limits on the amount of income and assets a person can have before their pension entitlements are affected. The tests also provide an upper limit and if you exceed this limit then you lose your pension entitlements.
  • The tests which apply depend on whether you are a single person, or a member of a couple, whether you own your own home or whether you don’t own your own home.
  • It is important when looking at a pension to see whether there is scope to minimise your assets, take advantage of deemed income provisions, utilise other special rules and maximise the pension you can receive.

A full list of rates is available on the Centrelink website at the following websites:


www.dva.gov.au/benefits-and-payments/eligibility (Department of Veterans Affairs)

Changes to the Assets Test from 1 January 2007

Refer to the Centrelink website – Rural customers and primary producers at:


  • In January 2007 the Assets Test rules were changed to provide that the value of all the land contained on the Certificate of Title on which a pensioner’s principal place of residence is erected is excluded subject to the following conditions:
    • The pensioner(s) must have owned the Title for at least 20 years and resided in the house on the Title for 20 years;
    • The pensioner(s) must show that the land is and will continue to be effectively used by themselves or a close family member to generate an income. For example, the pensioner or a family member is farming the property. This can include leasing the property out to a non-family member; and
    • This exclusion includes the value of any water entitlements or fixtures which attach to the excluded Title.
  • The advantage of this change is that the older generation in many farming families can now retain their house and a significant portion of surrounding land and still qualify for a pension. There is no upper limit on the area which can be excluded; however it must be contained on one title.
  • These changes have been strictly interpreted.
    • For example a client who owned a property and lived on the property for 15 years acquired another property 19kms away from their home block. They then sold the home block to their son and moved to the new block where they have lived for 13 years. Centrelink has indicated that the potential pensioners will not have that property excluded as they have not lived there for 20 continuous years.

There is a questionnaire to be completed by the pensioner or proposed pensioner and it can be downloaded at:


Five Year Rule

Refer to the Centrelink website – Rural customers and primary producers at:


  • The Five Year Rule provides that when a pensioner gifts an asset, the value of that gift is still regarded as an asset of the pensioner for a period of five years after the gift.
  • For farming families looking at succession planning, any transfer of farmlands to the younger generation may exclude the older generation from a pension for this five year period due to the deemed value of the asset being in the pensioner’s hands.
  • Offsetting rules such as the provision of a Granny Flat right to the older generation or Forgone Wages (discussed below) may be used to reduce Centrelink’s deemed value of the asset during this period.
  • While the Five Year Rule can have an impact on the decision on whether a pension is a viable option or not, it is important to remember that after five years from the date of the gift it is no longer classified as an asset and will not impact your pension.

There is a questionnaire to be completed by the pensioner or proposed pensioner and it can be downloaded at:


Foregone Wages

  • Centrelink will reduce the value of farmlands gifted to the younger generation in circumstances where the younger generation worked on or made capital improvements to the farmlands and received little no compensation. The value of the work which the younger generation carried out is known as Foregone Wages.
  • It is worthwhile investigating whether or not Foregone Wages can be used to offset the value of the gift and allow the older generation to obtain a part pension.
  • The rules relating to Foregone wages are complicated and it is imperative when considering a Foregone wages claim to obtain proper advice.

For further information, refer to:


Granny Flat Rights

  • Where land is transferred to the younger generation and the older generation retains a right to live in the property rent free for their lifetime Centrelink will deem this “Granny Flat right” to have a certain value which will be offset against the value of the gift.
  • The rules relating to Granny Flat rights are complicated and it is imperative when considering a Granny Flat right to obtain proper advice.

For further information, refer to:

www.humanservices.gov.au/customer/enablers/assets/rural-customers-and-primary-producers .

Trust and Company Attribution Rules

  • From 31 March 2002 Centrelink has the power to attribute the total value of a trust or company’s assets to an person who is:
    • A shareholder or director of a company; or
    • A Trustee, Appointor or beneficiary of a Trust.
  • This power can have a dramatic impact on many farming families looking at the pension and it can be applied retrospectively.
    •  We have been involved in a matter where all but 1.8% of the shares were transferred from the older generation to the younger generation five years prior to the pension application. When the mother applied for a pension at age 88 Centrelink deemed that 100% of the value of the company assets (more than $1,000,000) was hers. We successfully appealed to the Social Securities Appeals Tribunal.

If any member of the older generation is still involved in any way in a business structure it is imperative that you check with your advisors what impact this may have.

Income Deeming

  • Centrelink has specific rules regarding income you earn on financial investments. Essentially Centrelink deems that, regardless of the interest you actually earn on those investments, for the purpose of the Income Test you will only be treated as having earned a certain amount of income which depends on current interest rates and whether you are a single pensioner or a couple.
  • When investigating the pension it is important to take into account the effect the Deeming rules have on your assessable income. It is also important to structure investments so as to maximise the benefit of the deeming rules.

For further information, refer to:


Deeming Rates and Thresholds as at 30 June 2015








Rate below threshold




Rate above threshold




* A single pensioner can have approx. $150,000 liquid assets and qualify for a full pension.

* A couple can have assets of $260,000 combined and qualify for a full pension.

Pensioner Bonus Scheme

  • Registration for the pensioner bonus scheme is limited to those who met the age and residence requirements for the aged pension before 20 September 2009 and lodged an application to register prior to 1 July 2014.  If you are receiving or have received an aged pension, you are not eligible for a pensioner bonus.
  • The following table shows the maximum bonuses payable from 1 January 2009 to 31 March 2009:


(bonus periods)



















Commonwealth Seniors Health Card

  • The Commonwealth Seniors Health Card (CSHC) is available to people of pension age who are not currently receiving a pension.  There is no Assets Test for the card.
  • There are many benefits to having the CSHC and you should investigate whether or not you are eligible.

  (CSHC) as at 30 June 2015




Income limit (per annum)




Energy Supplement (per annum)


$275.60 each

$366.60 each

More Information

For more detailed information please refer to Centrelink’s website at:

www.humanservices.gov.au .

If you would like to discuss any of these topics or how they might affect you, please do not hesitate to contact one of our offices.

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