Navigating the Department of Human Services (Centrelink) legislation and rules regarding the Age Pension can be complex enough for Australian residents, let alone Australian Expats. In this article we aim to break down the complexity surrounding Age Pension eligibility to help provide guidance for Australians expats looking to claim in the future.

 

Eligibility for the Age Pension

 

To be deemed eligible for the Age Pension you must satisfy the following three requirements:

  • You must have reached the Age Pension age.
  • You are required to have a level of income and assets under the test limits.
  • You must have been an Australian resident for at least 10 years in total. Additionally, you are required to have no break in your Australian residency for at least 5 years straight.

 

Age rules

 

You must be at least 65 or older to be eligible for the Age Pension. For those born after 1 July 1952, the age in which you can claim the Age Pension increases on a tiered scale (see below).

age pension for Australian expats 1 

 

Age Pension Rates

 

The Australian Age Pension payment rates are dependent on the outcomes from your personal Income and Assets tests. The current maximum Age Pension payment rates are outlined in the table below. It is important to note that payment rates can be lower if you don’t live in Australia while you receive Age Pension entitlements (covered later in the article).

The above maximum rate then reduces based on your levels of Income and Assets.

age pension for Australian expats 2

 

Income and Assets tests to determine eligibility

 

Your Age Pension entitlement will be based on the lowest entitlement available to you after applying both the Assets and the Income test. For example, if you are entitled to $800 per fortnight under the assets test and $700 per fortnight under the income test, your Age Pension entitlement will be $700 per fortnight.

 

Income Test

 

The Department of Human Services assess your income from all sources. This ranges from income received employment to rental income to things like overseas pensions. You are required to provide comprehensive reports of all of your income received, from everywhere in the world.

It is important to note that there are some forms of exempt income which are not included in the Income test such as some social security pensions outlined under International Social Security Agreements (more on that later).

The Department of Human Services uses deeming rules to determine the income created from your financial assets irrespective of what these assets actually earn as income. Deeming applies to savings accounts and term deposits, managed investments, loans and debentures, listed shares and securities, some income streams and some gifts that you make.

This can be advantageous if your actual investment return is higher than the deemed rates. Alternatively, this can be detrimental if your investment asset such as a savings account does not produce interest higher than the applicable deeming rate. Deeming applies the following rules:

 

If you are single

The first $51,200 of your financial assets has the deemed rate of 1.75% applied. Anything over $51,200 is deemed to earn 3.25%.

 

If you are a member of a couple and at least one of you get a pension

The first $85,000 of your combined financial assets has the deemed rate of 1.75% applied. Anything over $85,000 is deemed to earn 3.25%.

 

If you are a member of a couple and neither of you get a pension

The first $42,500 of each of your own and your share of joint financial assets has a deemed income of 1.75% per year. Anything over $42,500 is deemed to earn 3.25%.

Now after factoring in your world wide income and deeming from any financial assets, your Age Pension entitlement will be subject to the following:

Based on the current rates, the maximum amount of income that you can receive from all sources (including deemed income) is $2,024.40 per fortnight or $52,634.40 per year.

Income Test Example

To put this into perspective, consider the following example. You receive rental property income of $25,000 per year and your $200,000 share portfolio is deemed to receive $5,732 in income per year ((51,200*1.75%) + (148,800* 3.25%)).

Your total income for Centrelink purposes is $30,732 per year. $30,732 is equal to $1,182 per fortnight which reduces your Age Pension entitlement by $505 per fortnight ((1,182 -172) * 0.5). This would leave you with an Age Pension entitlement of $421.20 per fortnight (505-926.20) or $10,951.20 per year.

 

Assets Test

 

Before being deemed eligible for an Age Pension entitlement you must pass both the income and the assets test. The assets test is slightly more complex in its calculation and requires disclosure of a multitude of different assets based on their “market value”.

Rather than list each individual asset and its potential exemptions or conditions please visit the assets page provided by the Australian Department of Human Services. It is important to note that the home that you live in and own (main residence) is not counted towards your assessable assets.

After calculating the full market value of your assessable assets, they are then assessed against the following asset test limits:

For every $1,000 of assets over the asset value limit, your Age Pension entitlement will be reduced by $3 per fortnight.

 

Assets Test Example

We can use the figures from the previous example for consistency. We will assume that the rental property that provides $25,000 per year in rental income has a market value of $300,000. We will also assume that you own a car worth $15,000 (market value) and that you own your own home that you live in currently (main residence).

Assuming that you hold no other financial or assessable assets other than a $200,000 share portfolio, a $15,000 car and a $300,000 rental property, your total assessable assets will be equal to $515,000. When applied to the assets test this means that your Age Pension entitlement will be reduced to $156.70 per fortnight or $4,074.20 per year (926.20 – (((515,000 – 258,500) / 1000) * 3))^^

^^ The above calculation takes your current assessable assets (515,000), minuses the maximum amount of assets allowable for a full pension (258,500). It takes this value and divides it by 1000 and times that value by 3 which provides the reduction in Age Pension entitlement applicable, in this case $769.50. It then reduces this maximum Age Pension (926.20) by the reduction applicable.

 

Outcome from the examples

 

The Department of Human Services will then compare the entitlements from the assets test ($156.70) and the income test ($421.20). The Age Pension that the individual in the example will be eligible for, is the lowest value from the two tests which is $156.70 per fortnight in this case.

 

This finally brings us to the issue of Australian expats accessing the Age Pension and what rules and conditions apply to receiving a payment.

 

Eligibility of Aged Pension for Australian Expats

 

The general rule regarding residency and Age Pension for Australian expats is that you must have been an Australian resident for at least 10 years in total. Additionally, you must have had no break in your Australian residence for at least 5 years. You must also have lived in Australia for at least 2 years before moving overseas.

Please note that above rules are subject to change based on the country that you are living in as an Australian Expat. As outlined below, some countries have a Social Security Agreement which circumvent the above rules.

 

Different pension rates and Income and Assets tests for people outside of Australia

 

This is where the assessments and rules can become a little tricky. It is important that Australian expats provide the Department of Human Services with as much information as possible regarding their residency and travel plans.

The rate of Age Pension you will receive will greatly depend on your specific circumstances.

If you leave Australia to live in another country*:

  • You will receive an outside of Australia Age Pension rate (See below)
    • It is important to note that this “outside of Australia rate” is also subject to the 35-year rule outlined below.
  • Your Pension Supplement will drop to the basic rate
  • You will no longer be eligible for the Energy Supplement

*This information is assuming the new country does not have an International Social Security Agreement in place with Australia.

For those that only plan to leave Australia for less than 6 weeks:

  • The Age Pension rate will remain the same
  • Your Pension Supplement will drop to the basic rate
  • You will no longer be eligible for the Energy Supplement

For those that plan to leave Australia for more than 26 weeks:

  • You will receive the normal Age Pension rate subject to the 35-year rule
  • Your Pension Supplement will drop to the basic rate
  • You will no longer be eligible for the Energy Supplement
  • 35 year rule
    • Your rate will depend on how long you were an Australian resident between the ages of 16 and 65 (Age Pension age)
      • If you were an Australian resident for 35 years or more your Age Pension rate won’t change
      • If you were an Australian resident for less than 35 years your Age Pension rate will be proportioned based on your years of residency. For example, if you were a resident for 10 years you will get 10/35ths of your usual rate.

 

Outside of Australia Rates

 

If you are eligible for the Australian Age Pension, you have been an Australian Resident for 35 years or more and if you live outside of Australia permanently, your Age Pension rates will be as follows.

 

 

Additionally, your levels of allowable income and allowable assets (income and assets test) will differ from the normal Age Pension tests.

 

The above Age Pension information regarding payment rate and eligibility, refers to Australians who wish to move to a different country permanently where the country does not have an International Social Security Agreement in place with Australia.

As outlined below, International Social Security Agreements further change the rules regarding Age Pension entitlement and in most cases, make it easier to satisfy social security and Age Pension tests regarding eligibility.

 

International Social Security Agreements

 

In addition to the aforementioned rules regarding residency and payment rates, there also exists International Social Security Agreements which dictate the level of social security you will be entitled to in your new country of residence.

Australia currently has Social Security agreements with the following countries:

  • New Zealand, Italy, Canada, Spain, Malta, The Netherlands, Ireland, Portugal, Austria, Cyprus, Denmark, Germany, United States of America, Chile, Croatia, Slovenia, Belgium, Norway, Switzerland, Korea, Greece, Japan, Poland, former Yugoslav republic of Macedonia, Czech republic, Slovak Republic, Hungary, Latvia India and Estonia
  • Guides and further information regarding these Social Security Agreements can be found here. Each country has different rules regarding social security and the payments you may be eligible to. Each Social Security Agreement will outline in detail the rules regarding eligibility, reciprocity between Australia and the relevant country and payment rates. Just so you are forewarned, the information provided within this link is slightly complex and is predominantly in legal speak.

Each Social Security Agreement has a specific mention to a topic called totalisation. Totalisation can work in the favor of the expat and allow you to more easily meet the previously mentioned Australian social security eligibility requirements.

For example, a claimant for the Australian Age Pension who has 7 years as an Australian resident (including 5 years continuously) and 4 years of contributions to the Italian social security system, can totalise those periods to meet Australia’s minimum 10 year residence requirement.

As each agreement is specific to the relevant country and the rules differ significantly from country to country, we will not go into too much detail as each country would require its own separate article.

 

How to apply for Social Security or the Australian Age Pension For Australian Expats

 

If you plan to claim the Australian Age Pension or Social Security in one of the aforementioned countries as an Australian non-resident, you should consult The Department of Human Services in Australia, the applicable Social Security department for the country that you are residing in and the relevant Social Security Agreement (if applicable).

These facilities will be able to provide you with expert advice and more information regarding your potential entitlements.

Many different factors come into play when assessing an individual’s eligibility for the Age Pension and Social Security in general. Your eligibility for Social Security payments from Australia depend on your current country of residence, time spent in Australia, if there is a Social Security Agreement in place and your current level of assets and income.

 

Please note all information provided in this article was based on the relevant Department of Human Resources information available at 02/09/2019. Age Pension for Australian expats rates and tests are constantly being changed based on legislative updates and indexation factors.

 

 

Resources used for research

https://www.humanservices.gov.au/individuals/enablers/pension-rates-payable-people-outside-australia/29791

https://www.humanservices.gov.au/individuals/services/centrelink/age-pension/managing-your-payment/if-you-travel-outside-australia

https://www.humanservices.gov.au/individuals/services/centrelink/age-pension

http://guides.dss.gov.au/guide-social-security-law

http://guides.dss.gov.au/guide-social-security-law/10

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