The simple explanation of these tests is that the pension claimer has to declare their income and assets. The income is then measured against the threshold. If the level of income is below the lower threshold a full pension can be paid under the Test. The higher the income the lower the pension. There is a high threshold which means that if the claimer has income above that threshold no pension will be available under that Test.
The Assets Test operates in a similar manner to the Income Test, however with different levels of thresholds. The actual pension available will be the lower result from the two Tests. As an example, if under the Income Test the full pension is available, while under the Assets Test only half the pension is available, the claimer will only receive the half pension.
Although under the simple explanation described above the Tests seem straightforward and simple, on a practical level they are far from it. The reason for this is because there are specific rules of what defines assets and what defines income and how they are measured under the Tests. In other words, one can hold investment assets which provide a high level of income however when it comes to the Income Test only a fraction of that income will be used for the Test and in a vice versa scenario one can receive a very low income however when it comes to the Income Test the valuation will be higher than the income actually received.
Another important point regarding the age pension is that by qualifying for any amount one is then entitled to a pension card which has economic value in the way of discounts from different Government bodies such as rates, fees and health matters, which are not available without the pension card. There could be a situation where a person may qualify as a result of the Income and Assets Test for a very small pension. The actual pension paid may be insignificant and the person may have the attitude of why bother, however the ability to qualify for the pension card (by receiving any amount of pension) will have a significant economical value.
Due to the complexity of how the Income and Assets Test works on a practical level, good advice on how to structure income and assets prior to applying can help the claimer to qualify to receive a pension. We help people by advising them how to structure their assets and income to qualify for age pension. One can be surprised by the ability to qualify for a pension and again one needs to remember the added economic value of the pension card.
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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It's also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.