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The Assets Test
Last amended: 22 September 2009
Application of the assets test
Service pension or income support supplement (ISS) will be assets tested when the:
- value of assessable assets exceeds the relevant assets value limit, and
- the rate of service pension, assessed under the assets test, for a person who is not a war widow/widower-pensioner, is lower than the one determined under the income test, or
- the rate of ISS or service pension calculated under the assets test for a war widow/widower-pensioner is lower than both the rate determined under the income test and the ceiling rate.
Assessment under transitional rules
The same asset value limits and asset test reduction rates apply to all income support recipients regardless of whether they are paid under the transitional rules, or the standard rules[glossary:.:] However, as recipients are being reduced from different maximum rates, there are differences in the asset levels at which payment ceases.
Calculating pension rate for a non- war widow/widower-pensioner
A person who is not a war widow/widower-pensioner can have assets up to and including the assets value limit and still receive the maximum rate of service pension, provided that their income does not exceed the income free area. If the assets value exceeds the assets value limit, the maximum payment rate is reduced by 75 cents for every $250 over the limit. The result is the assets reduced rate. This rate is then compared to the income reduced rate and the lower rate, plus any remote area allowance payable, is the rate of service pension.
Calculating pension rate for a war widow/widower-pensioner
With two exceptions, the maximum possible rate of ISS or service pension for a war widow/widower-pensioner is the ceiling rate (plus any rent assistance and remote area allowance payable). The exceptions are an ISS recipient with saved children where dependent child add-on and guardian allowance may be added to the ceiling rate, or a war widow/widower whose war widow/widower's pension is compensation reduced.
In calculating the rate of ISS or service pension for a war widow/widower-pensioner, if the assets value exceeds the assets value limit, the assets reduced rate is calculated by subtracting 75 cents for every $250 over the limit from the maximum payment rate. The assets reduced rate is then compared to both the income reduced rate and the ceiling rate. The lower of the three rates, plus any rent assistance and remote area allowance payable is the rate of the person's ISS or service pension.
No pension is payable if assets are above the limit at which service pension/ISS ceases.
Treatment of assets of a couple
If two people are partnered, they are treated as pooling their assets and sharing those assets equally. The assets value limit (AVL) of each member of a couple is also lower than the limit for a person who is not a member of a couple.
Higher assets limit for non-property owners
A person's assets value limit is also affected by whether they are considered to be a property owner. A person or couple who are property owners have a lower assets value limit than a person or couple who are not property owners.
Assets value limit is the maximum value of assets a person can have without affecting the person's pension rate. The assets value limit is worked out in accordance with SCH6-F3 of the VEA.
A service pension is an income support payment broadly equivalent to the social security age and disability support pensions. It may be paid once a veteran or partner has reached the nominated age or is incapacitated for work.
ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.
One element of the means test for income support pensions whereby the rate of pension payable to a pensioner reduces progressively as their assets increase above a certain threshold known as the assets value limit (AVL).
The ceiling rate of service pension and income support supplement (ISS) is applied to all war widows/widowers when assessing the rate of pension. This amount was previously frozen at $124.90 per fortnight, however, since legislation was introduced in September 2002, is now indexed twice yearly in line with percentage increases in the maximum rate service pension. A higher ceiling rate can apply, however, in the following cases:
If a person:
became a war widow/widower-pensioner before 1 November 1986,
has continually received service pension, social security pension or ISS since that date, and
the rate of pension immediately before that date was more than $120.10
in such a case the ceiling rate is equal to the pre-November 1986 rate plus 4%.
If a person:
is a person to whom ISS is payable,
is not permanently blind, and
whose Part II or IV pension is [glossary:compensation reduced:DEF/Compensation reduced pension],
the ceiling rate is the sum of the ceiling rate as calculated above and the amount of the reduction in the Part II or Part IV pension. The maximum ceiling rate cannot exceed the maximum rate of single service pension. For ceiling rates refer to SCH6-A4 to A9 of VEA. The amount of increase to the ceiling rate pension under Part II or Part IV is worked out by using the formula in SCH6-A9 of the VEA.
Pensioners and ISS recipients who were in receipt of pension on or before 19 September 2009 are eligible to be assessed under transitional rules, if:
- transitional rules will result in a higher rate of pension, and
- they have never been assessed under the new rules.
The requirement that the pensioner has never been assessed under the new rules, does not arise where the pensioner's entitlement is re-determined from a date prior to 20 September 2009. Where new pension information is received and is effective prior to this date, the pensioner's right to receive the transitional rate is considered anew.
Once a pensioner or ISS recipient has been assessed under the new rules they cannot revert to transitional rules. There is one exception to this, to cover respite care changes to pensioners who return to live as a couple again.
Recipients assessed under transitional rules:
- have their payment calculated using the transitional maximum basic rate,
- have a taper rate of 40 cents in the dollar for the income test, and
- can still receive the additional income free area for children.
Rules introduced as part of the Secure and Sustainable Pension Reforms that came into effect on 20 September 2009. For income and assets test purposes the changes include:
- an increase to the income test taper rate from 40 cents to 50 cents in the dollar,
- the abolition of the additional child income free area,
- the introduction of a fortnightly pension supplement to replace telephone allowance, utilities allowance, pharmaceutical allowance and the GST supplement, and
- the introduction of a work bonus, whereby only 50% of the first $500 per fortnight of employment earnings is assessable for eligible pensioners.
The income free area is the amount of income that an income support pensioner may receive without suffering any reduction in pension under the income test.
- legally married to another person and is not living separately and apart from the other person on a permanent basis; or
- living in a prescribed registered relationship with the other person (whether of the same sex or a different sex) and is not living separately and apart from that other person on a permanent basis; or
- all of the following conditions are met:
- living with another person, whether of the same sex or a different sex;
- not legally married to that person;
- in a de facto relationship with that person; and
- not in a prohibited relationship
The term “partnered” is also commonly used.
Property owner is defined in subsection 5L(4) of the VEA.