What are the changes? How will they affect me? Will they affect my current age pension benefit? These are the questions a lot of clients are asking us (Total Advice Partners) when we meet. This article will hopefully clear up the specifics around the proposed pension changes and provide you with a better understanding of things to come…
New pension changes will take effect from 1 January 2017. If you currently receive the age pension and own more than $816,000 in assets (including super and all other assets but excluding your home), then you will no longer be eligible to receive the age pension come January 1.
For those homeowner couples with less than $816,000 in assets, but more than $375,000, you should be warned that the proposed changes to Centrelink Age Pension entitlements will affect you. You can find more details on the specifics on how this will affect you later in this article.
These proposed changes to the assets test thresholds and pensioners capacity to claim full or part age pension entitlements will also have an effect on other areas of social security pensions, including areas such as the disability support pension, wife pension, carer payment, bereavement allowance, widow B pension and certain Department of Veteran Affairs (DVA) pensions. You should consider and speak with your financial adviser regarding the effects these have on your circumstances come 1 January 2017.
We have detailed the current and proposed changes to the age pension assets test below.
Assets Test Free Area for Full Pension
Your pensions will start reducing when your assets are more than the following amounts:
| Family situation | Homeowners | Non-homeowners | ||
| CURRENT | PROPOSED | CURRENT | PROPOSED | |
| 1 July 2016 | 1 January 2017 | 1 July 2016 | 1 January 2017 | |
| Single | $209,000 | $250,000 | $360,500 | $450,000 |
| Couple combined | $296,500 | $375,000 | $448,000 | $575,000 |
| Illness separated couple combined | $296,500 | $375,000 | $448,000 | $575,000 |
| One partner eligible, combined assets | $296,500 | $375,000 | $448,000 | $575,000 |
Assets Test Limits for Part Pensions
You pensions cancel and your will no longer be eligible for any age pension when your assets are more than the following amounts:
| Family situation | Homeowners | Non-homeowners | ||
| CURRENT | PROPOSED | CURRENT | PROPOSED | |
| 20 September 2016 | 1 January 2017 | 20 September 2016 | 1 January 2017 | |
| Single | $793,750 | $542,500 | $945,250 | $742,500 |
| Couple combined | $1,178,500 | $816,000 | $1,330,000 | $1,016,000 |
| Illness separated couple combined | $1,466,000 | $960,000 | $1,617,500 | $1,160,000 |
| One partner eligible, combined assets | $1,178,500 | $816,000 | $1,330,000 | $1,016,000 |
How do the Age Pension rules work?
To determine your age pension entitlements, Centrelink uses two different types of tests to ascertain your financial position and whether or not you fit the criteria to receive social security benefits. These two tests are called the ‘Income’ and ‘Asset’ Tests. The test which produces the lower Age Pension amount, or Zero, is applied. An individual who fails one of these tests will not be eligible to receive an Age Pension entitlement.
Age Pension can be a complex area of financial planning, for both the individual and extended family as whole to try and disentangle. Which is why, if you are seeking advice or wanting to assess your position for now and the future, contact us [Total Advice Partners on (07) 3284 7875] so we may assist you in this area of advice.
| Single, couple combined, illness separated (couple combined) pensioners | ||
| Single | ||
| Fortnightly income | up to $164 | over $164 |
| Reduction in payment | none – full payment | 50 cents for each dollar over $164 |
| Couple combined, couple separated due to ill health | ||
| Fortnightly income | up to $292 | over $292 |
| Reduction in payment | none – full payment | 50 cents for each dollar over $292 (combined) |
How will assets over the limit threshold affect your payment?
From 1 January 2017, your pension will reduce by $3 per fortnight for every $1,000 of assets you own over the asset free area.
The above shows the amount by which your age pension entitlement will reduce for every $1,000 over the minimum limit (for a homeowner, couple combined $375,000). This means the amount of assets a pensioner can have on top of their family home and still receive a part pension will be reduced.
Commonwealth Seniors Health Card
Pensioners who lose their Age Pension entitlements on 1 January 2017 as a result of the changes to the Centrelink Age Pension assets test will be automatically issued with a Commonwealth Seniors Health Card. They will be exempt from the usual income test requirements for these cards indefinitely.
The Commonwealth Seniors Health Card gives older Australians access to cheaper prescription medicines, Australian government funded medical services, and other government concessions.
What Can You Do To Retain Your Pension?
Not everything you own is actually counted towards your assets for the purposes of the test. For example, your principal residence (family home) is not included in your total assets. There are a number of assets which are exempt from the assets test.
With everyone’s situation being different, it is prudent you speak your experienced financial planner to get professional advice regarding your retirement income and the effects these changes may have on your situation moving forward. Total Advice Partners are available to assist with all your enquiries. Please feel free to contact us at any time to discuss your situation and financial needs.
Total Advice Partners
(P) (07) 3284 7875 | (F) (07) 3284 4790
(E) info@totaladvice.com.au
