Assets test

This page explains what assets are, and how the assets test is applied while working out the rate of a pension. This page is not exhaustive. For more information about what assets are included in the assets test and for your obligations please refer to ‘You and Your Pension’.

Note: whilst this page used the term "Pension" and "Pensioner" it also applies to recipients of Veteran Payment.

The rates on this page are effective from 1 January 2024.

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What are the income and assets tests?

The amount of income support or ‘means-tested’ pension you receive depends on your income and assets. The pension is calculated under 2 separate tests - the income test and the assets test. The test paying the lower rate of pension is the one that is applied. If you are a member of a couple, your pension is calculated on your combined income and assets, regardless of which one of you actually receives the income or owns the assets.

Money in a superannuation fund which is in the accumulation phase and not paying a pension is not counted under the income or assets test until one of the following occur:

• the owner reaches pension age (qualifying age for war widow/widowers or wholly dependent partners)
• money is withdrawn from the superannuation fund
• a pension commences to be paid from the superannuation fund.

For more information about the assessment of superannuation, please see Managed Investments and Income Streams.

If you are considered to be blind, the pension is paid at the maximum rate. This means that your income and assets will not affect your rate of pension. Your partner’s pension will still be subject to the income and assets tests unless they are also considered to be blind. For further information please see Financial help if you are blind.

The income and assets tests only apply to income support pensions. Disability Compensation Payments, War Widow(er)’s Pension and equivalent payments under the Military Rehabilitation and Compensation Act 2004 (MRCA) are not subject to the income and assets tests.

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What is the assets test?

To work out your correct rate of income support pension, we need to know the value of your assets which are counted under the test. Generally, the value used is the current net market value, or the amount which you could reasonably expect to get for the asset if offered for sale on the open market, less any debts owed on the asset. Debts on the asset will include mortgages or secured overdrafts.

For the maximum rate of pension to be payable, you may have assets up to the assets value limit (the asset limit before pension reduces), provided your income does not exceed the income free area (the income limit before pension reduces).

When the market value of your assets exceeds the assets value limit, your pension is reduced by 75 cents per fortnight for every whole amount of $250 worth of assets above the limit. The pension continues to reduce at the rate of 75 cents for every $250 worth of assets over the limit until the value of your assets reaches or exceeds the assets cut-off limits. No pension is payable if you have assets above the cut-off limits.

For a couple, the value of the assets is split between each member of the couple and the rate of reduction is the same for each member of the couple.

For information about the income free areas and the income test, please see Income Test.

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Mortgage of exempt assets used to finance assessable assets

Debts (mortgages) raised against exempt assets (for example, your principal home) and used to finance other assessable investments, do not reduce the assessable value of those assets. Some investment companies market plans under which you may borrow against the equity you hold in your home (an exempt asset). Such plans may reduce your pension under the assets test. The investments you make with the borrowed monies are assessable assets, but the value of the mortgage on your exempt home cannot be deducted from the assessable asset value.

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Assets Value Limits - Service Pension, Social Security Age Pension and Veteran Payment

The value of the assets you may own before your rate of pension reduces depends on your relationship status and residential situation:

• there are different limits for singles and couples
• as the principal place of residence is an exempt asset, non-home owners are allowed the concession of a higher assets value limit.

The assets value limits for Service Pension, Social Security Age Pension and Veteran Payment are:

Relationship and residential status	Low limit (home owners)	High limit (non-home owners)
Singles	$301,750	$543,750
Couples* - combined	$451,500	$693,500

* Includes illness separated and respite care couples.

This means you can have assets up to and including these amounts and still get the maximum rate of pension, provided your income does not exceed the income free area.

Example 1: A single person, who is not a home owner, has assets of $187,000. The maximum rate of pension or Veteran Payment will be paid because the amount of these assets is less than $543,750 (the high limit for singles).

A couple, who own their home, have assets of $468,500 (this does not include the value of their home). Their pension or Veteran Payment will be paid at a reduced rate because their assets are more than $451,500 (the low limit for couples).

Remembering that pension is reduced by 75 cents for every $250 over the limit, the amount of reduction is calculated as follows:

Step	Action
1	Divide the couple’s combined assets in half $468,500 ÷ 2 = $234,250
2	Divide the low asset value limit for couples in half $451,500 ÷ 2 = $225,750
3	Work out the amount that is above the assets value limit $234,250 - $225,750 = $8,500
4	Divide the amount above the limit by $250 $8,500 ÷ $250 = $34.00
5	Multiply this amount by 0.75 to get the pension reduction $34.00 x $0.75 = $25.50

In this example, each member of the couple would have their pension or Veteran Payment reduced by $25.50 per fortnight. The assets value limits are adjusted each July in line with movements in the cost of living.

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Assets Value Limits - Income Support Supplement for War Widow(er)’s and Wholly Dependent Partners

The value of the assets you may own before your rate of Income Support Supplement (ISS) reduces depends on your relationship status and residential situation:

• there are different limits for singles and couples
• as the principal place of residence is an exempt asset, non-home owners are allowed the concession of a higher assets value limit.

The assets value limits for ISS are:

Relationship and residential status	Low limit (home owners)	High limit (non-home owners)
Singles	$552,250	$794,250
Couples - combined	$775,000	$1,017,000
Illness separated - combined	$952,500	$1,194,500

This means you can have assets up to and including these amounts and still get the ceiling rate of ISS, provided your income does not exceed the income limit before ISS reduces.

Example 2: A single ISS recipient, who is a home owner, has assets of $558,250. Her pension will be paid at a reduced rate because the amount of these assets is more than $552,250 (the low limit for singles).

Remembering that pension is reduced by 75 cents for every $250 over the limit, the amount of reduction is calculated as follows:

Step	Action
1	Work out the amount that is above the asset value limit $558,250 - $552,250 = $6,000
2	Divide the amount that is above the limit by $250 $6,000 ÷ $250 = $24.00
3	Multiply this amount by 0.75 to get the pension reduction $24.00 x $0.75 = $18.00

In this example, the Income Support Supplement would be reduced by $18.00 per fortnight from the ceiling rate. The assets value limits are adjusted each July in line with movements in the cost of living.

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What assets are counted?

The following list shows the common types of assets that are counted for pension purposes:

• money in bank, building society and credit union accounts
• investments in shares, managed investments, bonds and debentures
• vehicles (including cars, boats and caravans)
• household contents and personal effects
• businesses, companies and partnerships
• real estate (other than the principal residence)
• properties (including farms) with over 2 hectares of land surrounding the principal home unless certain conditions are met
• trusts
• life assurance/insurance, based on the surrender value (the amount received on redeeming the policy)
• loans
• gifts (totalling more than $10,000 in a financial year or totalling more than $30,000 in a rolling 5 year period)
• partially asset-test exempt income streams
• asset-tested short term income streams
• asset-tested long term income streams
• asset-tested lifetime income streams
• superannuation funds in the accumulation phase (including retail, industry, corporate, employer or public sector funds, retirement savings accounts and self-managed superannuation funds) for pensioners who are over pension age (qualifying age for war widow(er)s and wholly dependent partners)
• cash on hand over $500
• bullion
• collections (such as coins and stamps).

A number of less common assets may also be counted as assets for pension purposes. If you have any assets other than those mentioned above, contact DVA for information.

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What assets are not counted?

The following assets are not counted under the assets test:

• principal place of residence which you own, including during any period (not exceeding 12 months) of temporary absence from your residence
• lost or damaged principal place of residence which you own during an extended temporary absence of up to 24 months because you were experiencing delays beyond your control in rebuilding or acquiring your home
• land up to 2 hectares surrounding your principal home, if it is on the same title and used for private and domestic purposes
• all land on the same title as your principal home, if you are of veteran pension age (60 years), have lived on the land for 20 years or more and are making effective use of the land, where possible
• the value or half the value of an asset-test exempt or partially asset-test exempt income stream purchased before 20 September 2007
• the value of money in a superannuation fund (including retail, industry corporate, employer or public sector funds, retirement savings accounts and self-managed superannuation funds) but only until you reach pension age (qualifying age for a war widow/widower or a wholly dependent partner) or commence a pension or income stream from the fund
• the value of investments in a superannuation fund, or rollover fund (such as an approved deposit fund or a deferred annuity) but only until you reach pension age (qualifying age for a war widow/widower or a wholly dependent partner) or start to draw an income stream from the fund
• the value of an interest in a granny flat or a sale leaseback home (conditions apply
• the value of a cemetery plot for you or your partner and prepaid funeral expenses
• up to 2 exempt funeral bonds (if the sum of the amount invested does not exceed the $15,000 funeral bond threshold and there is no prepaid funeral arrangement)
• aids and appliances for a disabled person (where that person is a DVA pensioner, their partner or dependent child)
• the value of medals awarded to you
• the value of the former home in which you resided prior to you becoming an aged care resident, for up to 2 years from the day you entered a care situation
• the value of a lump sum accommodation bond paid to a residential aged care facility
• the principal place of residence which you own for up to 2 years while you are absent from that residence because you are personally providing community based care to another person
• the value of the former home in which you resided prior to you becoming a permanent aged care resident, but only if you entered care before 1 January 2017, are renting out your former home and are:
  • paying a daily accommodation payment
  • paying a daily accommodation contribution
  • paying an accommodation charge; or
  • paying an accommodation bond wholly, or partly, by periodic payments.

If you sell your principal home the proceeds of the sale will be an exempt asset for up to 24 months, as long as you are planning to use the proceeds to buy another home. This asset exemption can be extended for up to an additional 12 months if you are experiencing delays beyond your control in acquiring a new home. However, you will be deemed to be earning interest on the proceeds in the meantime and this will be counted under the income test. For more information, please see Selling Your Home.

If you mortgage your principal home to fund another investment, the mortgage is not transferable. This means that the full asset value of the other investment is assessable. A mortgage must be taken out against the investment property to allow a reduction in its asset value.

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What are unrealisable assets?

If you have substantial assets you may receive a reduced rate of pension, or no pension at all under the assets test. Where those assets produce little or no income, and cannot reasonably be expected to be sold or borrowed against to produce income, they may be regarded as being unrealisable assets. If you have unrealisable assets and are receiving a reduced or nil rate of pension, you may be entitled to receive a rate of pension under the financial hardship provisions. For more information on the financial hardship provisions please see Ask us not to count some assets in assets test.

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What are my obligations?

When you are granted an income support pension and periodically after that, you will be notified of your obligations. You will be required to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of changes to your circumstances that might affect the rate of income support pension you receive or your eligibility to receive that pension. These obligations apply equally to trustees.

If your pension is paid under the assets test, or if your assets are within $10,000 of the amount which would mean that your pension is assessed under the assets test, we will update the value of any business, farm or other property (such as a holiday home) each year. If you have shares or unit-based managed investments we will update the value of these assets twice each year in March and September. You do not have to tell us about changes in the value of these assets.

The sorts of situations you need to tell us about within 14 days (28 days if you live overseas or receive remote area allowance) are:

• your pension is reduced under the assets test and you increase your assets; or
• your pension is reduced under the income test or your pension is paid at the maximum rate and the increase in assets would put your total assets over the assets value limit.

Usually an overpayment of pension will not occur when you have met your obligations. However, sometimes even if you have met your obligations, an overpayment can occur because we have not been able to process the change before the next payday. We do our best to avoid this occurring, but it is not always possible. To provide you with your exact entitlement we are obliged to recover overpayments of pension where they do occur.

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