Will a new car change your Age Pension?

Q. Claire

My husband and I want to buy a new car and probably spend a bit more than we normally would to include some added safety features. Do we need to declare it as an asset to Centrelink?


A. Many people regard a car as a necessity rather than a financial asset, but unfortunately Centrelink doesn’t agree.

Motor vehicles, boats and caravans must all be declared to Centrelink as an asset when applying for the Age Pension, but it’s not all bad news as cars are not considered financial assets, that is, an investment that makes you money, so are not subject to deeming.

Deeming works out income from financial assets and adds this to your other income. Centrelink then applies its income test to your combined income to work out your Age Pension payment rate. This will be important later.

But back to cars. As you declared your car and any other vehicles as assets when you applied for the Age Pension, any changes to those assets also need to be declared. So, a new car means you must notify Centrelink.

However, if you take money out of your bank account, or any other money-earning financial asset, to pay for the car, that might allow you to get more pension under the income test.

And it works like this: as you have reduced your income-earning financial asset – your bank account, which is assessed using deeming rules – to buy a car that is considered a non-deeming asset, you have reduced the amount Centrelink can apply the income test to your bank account.

So, you get a new car, and maybe score some more Age Pension as well. 

Centrelink will assess the value of your car according to current market value, and it may be worthwhile notifying them of any annual depreciation as it may increase your pension as well.

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