Assets test for social security

All assets that are not specifically excluded from assets tests are assessed. Assessable assets include all property and investments owned or controlled by a person within and without Australia. Assets test limits are indexed annually.

The value of an asset is the net market value, this is the price it could be sold for, less any debts.

Exempt assets

• your principal home, that is the home you live in, and the land around the home used for domestic purposes (up to two hectares);
• certain income streams which have all of the required characteristics;
• all superannuation/rollover investments until Age Pension age;
• any property or moneys left to you in an estate which you have not yet received;
• a 'funeral investment' of not more than $5,000;
• an advance payment for a cemetery plot and funeral services;
• aids for disabled people;
• vehicles provided by Department of Veterans' Affairs under the Vehicle Assistance Scheme (gift car scheme);
• proceeds from the sale of your principal home which you intend to use, within 12 months, to purchase another home; and
• most compensation or insurance payments for loss or damage to buildings or personal effects.

Application of the assets test

When a pensioner exceeds the asset test thresholds, the pension is reduced by (prior to 20 September 2007) $3 per fortnight per every thousand dollars over the lower asset test threshold. When the net market value of all assets exceeds the upper asset test threshold benefits cut out entirely. This is generally a more harsh means test than the income test, it is the one that usually gives the lower benefit.  On 20 September 2007 the asset test "taper rate" will be reduced from $3 per fortnight per $1,000 of excess assets to $1.50 per fortnight per $1,000 of excess assets.

For allowances such as Newstart allowance, the bottom threshold is "sudden death", if you exceed these thresholds by even a dollar you go from full entitlement under the assets test to zero entitlement.

There are a number of strategies to reduce the effect of the assets test. These include: 

• put money into super (only works if you are under age pension age and not drawing an income stream, though if your spouse is under the age pension age you can contribute money into your spouse's account and gain a temporary exemption on those asstes)
• make your money vanish by paying off private debts
• trade up to a larger house
• use asset test exempt income streams such as complying pensions and annuities
• pre-pay your funeral, rather than leave it as an expense to your estate
• you can gift up to $10,000 worth of assets in a year without triggering deprivation, to a cap of $30,000 in any five year period

To download the latest Centrelink's "Guide to Australian Government Payments" booklet, in which benefit amounts and means test thresholds are shown, click here.