You can receive the Age Pension and live permanently overseas

We have quickly learnt that this topic provides the most confusion with our readers and people that we have met. It’s like that adage, ‘you ask an economist a question you get three different answers’.   Unfortunately, in this case you ask Centrelink a question you get put on hold for an hour, then get six different answers and none of those are correct.

So, let’s be very clear here, YOU CAN LIVE PERMANENTLY OVERSEAS, EVEN BECOME A NON-AUSTRALIAN TAX RESIDENT AND RECEIVE THE AUSTRALIAN AGE PENSION.

However, you will lose some of the supplement payments if you choose to live overseas. In addition, there are some rules around when and how you can apply for the pension, and some rules around the percentage of your Age Pension entitlements that you can receive if you live overseas, depending on how long you have been a resident of Australia.

In saying that, for a great majority of Australians the rules will not be a hindrance should you wish to live overseas in retirement.

You won’t be alone

According to the Federal Department of Social Services, there are estimated to be about 80,000 Australians who live overseas whilst still receiving their Age Pension entitlements. This figure is expected to grow substantially over the next decade.

Currently, the largest number are of Italian heritage, followed closely by the Greeks then New Zealanders. And this would make sense. After WWII and throughout the 50’s and 60’s, Australia saw a large influx of migrants from those countries. They have since retired and are now enjoying some of their retirement years with their extended families in ‘the old’ country, where no doubt their money goes far further.

The next large wave of new Australians came from Asia throughout the 70’s, 80’s and 90’s. We will see many of these migrants also choosing to live back in their home countries, and still being able to claim the Age Pension when their time to retire comes.

Rules for applying for the Age Pension

To be eligible for the Age Pension you:

• Must have been an Australian resident for at least 10 years, with at least 5 of these years being in one continuous period, unless:
  • You were a refugee
  • You were receiving either the Partner or Widow allowance or Widow B Pension prior to turning Age Pension age
  • You are a woman whose partner died while both were Australian residents, and you have been an Australian resident for at least two full years before claiming the Age Pension
• Must be and Australian resident and residing in Australia when you apply
• Pass the Income and Assets tests. The test that provides the minimum level of pension will apply to you
• Be of a minimum age to receive the Age Pension (currently age 65 but rising to age 67)

How much can I receive if I move overseas?

The amount that you receive will depend on the following:

Your assessable income and assets

It is not our aim to go into the details of these tests here, suffice to say that these tests are applied universally irrespective of where you choose to live. It is the same tests for all.

The test that provides the least pension payable will be the test applied by the Dep’t of Human Services in determining your Age Pension payment amount.

The length of time you have lived in Australia matters if you move overseas

When a person retires overseas, they will be paid a level of Age Pension in accordance with the length of time that they resided in Australia between the age of 16 and Age Pension age.

If you have lived in Australia for 35 years and above, you will receive your full Age Pension entitlements based on the Income and Assets tests. Even if you move overseas.

If you have lived in Australia for less than 35 years during this time, you will receive a proportion of your Age Pension entitlements based on your Income and Assets tests.

The proportion is the amount of years that you have lived in Australia, divided by 35 years, times your Income and Assets tests determined Age Pension entitlement.

For example: John has lived in Australia for 15 years throughout the ages of 16 and 65 (current Age Pension age). His Income and Assets Tests Age Pension entitlement is $400 / fortnight.

John would receive an Age Pension entitlement of 15yrs /35yrs * $400 = $171.42 / fortnight if he were to move overseas in retirement.

Note: if John did not move overseas permanently he would still receive the full Age Pension entitlement of $400 / fortnight by staying in Australia.

Reduced supplement payments

If you move overseas permanently, you can expect that your pension supplement will reduce to the basic rate, and your energy supplement will stop.

These supplements make up a small fraction of your overall Age Pension entitlement.

As these supplements are there to assist in paying for things such as pharmaceuticals, telephone, internet and utilities, and these costs are generally much cheaper in Asian countries, we have seen that the reduction in these supplement payments are negated by the reduction of the costs of these services in Asian countries.

Apply before moving overseas, if you can

If you are eligible and entitled to the Age Pension you will need to apply before moving overseas. You must be living in Australia when you apply.

It may even be in your interest to hold off moving overseas if you are approaching the age that you can apply for the Age Pension, due to the reason below.

What if I am already living overseas?

You can live anywhere around the world once you are receiving the Age Pension, however, there is one further rule that you must follow if you are already living overseas and would like to apply for the Age Pension when you become eligible to do so.

The extra rule is that you must be living in Australia for at least two years over the period that you apply for the Age Pension.

You can apply for the Age Pension at any time throughout this two-year period, but you must return to Australia for a two-year period to apply.

All the other ‘rules for applying for the Age Pension’ will also apply as previously mentioned.

Planning considerations

Being able to receive the Age Pension could be of significant benefit when retiring to a cost-effective part of the world, where even the smallest of dollars can go so much further.

It enables many to enjoy a better lifestyle while keeping more of their personal investment funds intact for longer.

We suggest that whenever possible that you review your Age Pension entitlements before you retire overseas.

It may also be in your interest to postpone retiring overseas if Age Pension age is approaching. Under this scenario, it may be advisable to spend time overseas on shorter trips and remain an Australian resident until you qualify for the Age Pension.

If you are already living overseas and qualify for the Age Pension, we can assist in assessing the benefits that you would obtain from the Age Pension, then will leave it to you to decide whether moving back home for two years is worth the extra income you may receive.

Making the right decisions may have a significant impact on your financial and social future.