Australia and the United States
Does my US Social Security affect the Australian Age Pension?
Yes, as income rather than as a deduction. Australia counts most foreign pensions in its income test at the gross rate, before any US tax, so a US Social Security payment reduces the Age Pension by 50 cents for every dollar above the free area. There is one important exception. If you are in Australia as a New Zealander on a non-protected Special Category visa, the Agreement with New Zealand takes your US payment out of the income test and deducts it in full instead, which costs you twice as much.
It is income, not a deduction
Australia has two ways of handling a pension from another country. It can count it as income and run it through the income test, or it can take it straight off the top. Which one applies is decided by the agreement with the country in question, and for the United States there is no special treatment.
So the general rule applies. The Department of Social Services puts it this way: "The gross current rate of payments from overseas is generally treated as income for social security purposes."
That means your US Social Security is added to everything else Australia counts as income, and the pension comes down on a taper rather than dollar for dollar.
What the taper actually does
For a single pensioner, Services Australia sets out the arithmetic in two lines: income up to $226 a fortnight costs you nothing, and over $226 the pension reduces by "50 cents for each dollar over $226". The pension reaches zero at a fortnightly income of $2,627.80.
Your Age Pension
For a couple the free area is $396 a fortnight combined, each person's pension reduces by 25 cents for each dollar over it, and the combined cut off point is $4,016.80.
Two things about how your US payment is measured.
It is the gross figure. Services Australia is explicit: "We use the amount before tax. You can't deduct any bank charges, tax or exchange rate conversion fees." Whatever the Social Security Administration withheld before the money reached you, Australia counts the amount before that happened. The Department adds that no amount is deducted "for foreign country debts deducted from the overseas payments" either.
It moves with the currency. "We change all income from outside Australia to Australian dollars for the income test. The exchange rate changes each month." Your assessed income can rise in a month where nothing at all has happened to your American payment.
And remember the income test is only half the assessment. The Age Pension is worked out under both an income test and an assets test, and whichever produces the lower payment is the one that applies.
The exception that catches New Zealanders
Here is the part worth reading twice, because it turns on your visa rather than on anything about the money.
If you are in Australia as a New Zealander, your Age Pension may be calculated under the Agreement between Australia and New Zealand rather than under Australian rules alone. That Agreement has its own instruction for a pension from a third country, meaning anywhere that is not Australia or New Zealand. The United States is a third country.
Article 13(7) splits it two ways:
- If you are a permanent resident of Australia, your US pension "is treated as ordinary income" and tested at 50 cents in the dollar, like anyone else's.
- If you are not, the US pension "is disregarded as income" and is "directly deducted" from your rate instead. Dollar for dollar.
A permanent resident, for this purpose, means an Australian citizen, a permanent visa holder, or a protected Special Category visa holder. A New Zealander who arrived on a non-protected Special Category visa is none of those.
The practical difference is large. The same US payment costs a permanent resident 50 cents in the dollar above a free area, and costs a non-protected visa holder the whole dollar from the first dollar. Which door you came through turns out to change what your American pension is worth to you.
The same article does the same thing to New Zealand Superannuation for everyone, protected or not: always directly deducted, never income tested.
What the agreement with the United States does do
It exists, it started on 1 October 2002, and it is useful, just not for the income test.
The Department describes it as a shared responsibility agreement that helps people "qualify for benefits they might not otherwise get", by allowing claims to be lodged in either country, "allowing people to totalise to meet minimum residence qualifications for Australian benefits and minimum contribution requirements for US benefits", and allowing agreement benefits to be paid in both countries.
Totalisation is the valuable part. Australia normally wants ten years of residence. The United States normally wants forty quarters of coverage. Under the agreement, time in one country can help you over the line in the other. That is the opposite of the position between the United States and New Zealand, where no agreement exists at all.
The Department also notes the US system in its own summary: contribution based, "a person cannot accrue more than 4 quarters of coverage in any one year", and "the minimum qualifying period for a retirement benefit is normally 40 quarters of coverage (roughly equal to 10 years work)".
Two timing rules that catch people
If your partner dies. For 14 weeks after a death, the income test does not include "any survivor's or widow's pension you get" or "any increase in your own payment". A US survivor benefit starting in that window is not counted during it.
If a lump sum of arrears arrives. Back payments are not treated as income in the fortnight they land. The Department apportions them across the period they cover and assesses them retrospectively, and "any amount by which the pensioner's Age (or any payment their partner received) is reduced over that period becomes a recoverable debt". So a long-delayed US determination that finally pays out several years at once can create an Australian debt for those same years.
What this guide does not tell you
It does not tell you whether you can be paid US Social Security in Australia at all. The agreement makes that far easier than it is for New Zealand, but the answer still depends on your own record.
It does not cover tax in either country, or Medicare.
It does not cover the assets test, or how an American retirement account rather than a pension payment is assessed. A 401(k) or IRA is a financial asset once you can reach it, which is a different question with a different answer.