A surprising rule regarding credit cards in the Age Pension assets test could impact the amount of financial assistance you receive in retirement.
When applying for the government assistance, there is a long list of assets that need to be declared, ranging from property and business interests and personal items such as jewellery and computers, to financial investments and income streams, including superannuation income.
Centrelink assesses all of these things in what’s called an assets test. Each single person, or couple, is allowed to have a certain value of assets before it affects their Age Pension payment.
However, you may not know that your credit cards are also, in part, classed as an asset and can impact how much money you’re given. The credit card limit liability itself isn’t assessed, but any positive balance you have on the card is.
“We don’t classify the amount of available credit on a credit card as an asset for payments, including the Age Pension,” Hank Jongen, general manager at the Department of Human Services said.
“[However] if you have deposited money into the credit card account, any positive balance needs to be advised as an asset.”
For example, if you have available credit of $20,000 and deposit $3,000 into the account which has no debit balance, your total will change to $23,000. Centrelink will only assess the $3,000 as a financial asset and not the $20,000.
While the list of assets you must declare is quite lengthy, there are many things that the government doesn’t take into account, including your main home and any surrounding land up to two hectares. Property or money left to you as part of an estate, which you cannot access for 12 months is also exempt, as is any money received through the NDIS, along with aids for those with disabilities.
Pre-paid funerals, cemetery plots, accommodation bonds paid to aged care facilities and superannuation payments from which a pension is not being paid, are also exempt from assessment and don’t need to be declared.
Currently, a single pensioner who owns their own home and is in receipt of the full entitlement can have assets valued up to $263,250 before their payments are affected, while individuals who don’t own a home can have assets worth up to $473,750.
For couples in receipt of the full pension, homeowners can have combined assets worth $394,500, while the limit for non-homeowners is $605,000 before it impacts upon their Age Pension payments.
The assets test limits increase for those on a part pension, however, those in possession of assets valued over the stated amount will have their pension payments stopped rather than reduced. Individuals can have assets worth up to $574,500 (homeowner) and retain their part pension, or $785,000 for those who don’t own their own property.
For couples on a combined part pension, the limit for homeowners is $863,500 and $1,074,000 for non-homeowners, while couples on a combined pension, however separated due to illness have asset limits of $1,017,000 and $1,227,500 for homeowners and non-homeowners respectively.