A significant number of Australian retiree’s face losing their age pension from January 2017. The Federal government estimates there will be over 300,000 people affected by the changes that will result in them losing all or some of their Age Pension. The amount of Age Pension is affected by two tests, the asset test and the income test. It is the asset test that is being changed.
The government apply the two tests and pay your Age Pension based on whichever of the tests results in you receiving the least Age Pension. If your Age Pension is impacted by the asset test or you don’t know which test is applicable to you, you should read on. The asset test threshold, for a couple who own their own home, is being reduced from $1,178,500 to $816,000. This will mean that for a couple with assets of more than $816,000 (excluding the family home) they will be impacted and see their Age Pension potentially disappear completely. For single home owners, the asset test threshold is being reduced from $793,750 to $542,500. Assets above this level will mean that they will be impacted and lose their Age Pension. The limits for couple non-home owners are changing from $1,330,000 to $1,016,000 and for single non-home owners from $945,250 to $742,500. Again, assets above these levels will result in a loss of Age Pension.
There is also some good news. For couple homeowners, the asset test cut off amount for full Age Pension is increasing from $296,500 to $375,000. As a result, more people will receive the full Age Pension. The limit for single homeowners is rising from $209,000 to $250,000. For couple, non-home owners, the full Age Pension asset test lower limit, is increasing from $448,000 to $575,000 and for singles it is increasing from $360,500 to $450,000. However, once the full Age Pension threshold has been reached the pension will be reduced at a much faster rate than was previously the case. Before January 2017 the rate of reduction is $1.50 of Age Pension per fortnight for every $1,000 of assets above the relevant full Age Pension threshold relevant to you. From January, the reduction rate will increase to $3.00 of Age Pension per fortnight for every $1,000 of assets above the full Age Pension threshold. This will make the Age Pension tapper off much more quickly for those on part pensions with assets between $375,000 and $816,000. In light of these changes it is important to check your financial position and discuss the changes with a financial adviser. There may be strategies available to you to mitigate the impact of the changes if:
- You are at the higher end of the relevant asset test scale with assets greater than the cut of limit for age pension.
- You are in the middle of the relevant ranges and currently receive a part pension.
- You will be affected by the increase in the full Age Pension cut off amount asset test threshold but still have slightly too much to qualify for the full Age Pension under the new relevant threshold.
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If you need assistance, please feel free to give us a call on 8212 2366 to arrange a time to meet so that we can discuss your particular requirements in more detail. The information contained in this note is general in nature and does not take into account your personal circumstances, objectives, needs or financial situation. Therefore, you should consider whether the information is appropriate before you act upon it. This general information note should not be relied upon in place of appropriate professional advice. You should obtain a Product Disclosure Statement relating to any financial product and consider the statement before making any decision about whether to acquire the product. Taxation, legal and other matters referred to in connection with financial products are of a general nature only and are based on our understanding and interpretation of laws at the time of publishing and should not be relied upon in place of appropriate professional advice.
Gray Perry Wealth Advisers Pty Ltd and Allan Taylor are Authorised Representatives of Lionsgate Financial Group Pty Ltd ABN 92 140 591 484 AFS License 342766