Are you prepared?
How the assets test will work in 2017 could increase your Age Pension entitlements, or take some or all of them away.
With revisions to the Age Pension recently implemented, it’s important to understand how the changes could impact you, particularly with part-pension thresholds somewhat tighter than initially projected.
These thresholds are the value of assets you can own (excluding your home) before you lose eligibility for the Age Pension.
Who the changes will affect
The Age Pension assets test changes will affect Age Pension recipients, aged 65 and over. To be eligible for full or part Age Pension, retirees must satisfy an income and assets test, as well as other requirements.
According to reports, changes to the assets test, effective as of 1 January 2017, will see more than 50,000 additional Australians receive the full Age Pension. Meanwhile, roughly 300,000 retirees on the part pension will have their entitlements reduced, with about 100,000 losing all entitlements.
What’s actually changing in 2017?
The Age Pension assets test thresholds will change
The cut-off thresholds previously announced were only projections, as Age Pension rates were not updated until 20 September 2016.
Following the recent update to Age Pension rates, the part-pension cut-off thresholds are a bit tighter than previously announced, meaning more people could be affected. The lower thresholds for eligibility for a full pension remain unchanged.
If your assets are below the thresholds in table one, you will be eligible for a full pension under the 2017 assets test.
| Full pension | Previous asset limits | 2017 asset limits |
| Non-homeowner (single) | $360,500 | $450,000 |
| Non-homeowner (couple) | $448,000 | $575,000 |
| Homeowner (single) | $209,000 | $250,000 |
| Homeowner (couple) | $296,500 | $375,000 |
The table below outlines the assets test cut-off point for those on a part pension.
If you have assets above these limits, a part-pension will no longer be payable.
| Part pension | Previous asset limits | 2017 asset limits |
| Non-homeowner (single) | $945,250 | $742,500 (initial projection $747,000) |
| Non-homeowner (couple) | $1,330,000 | $1,016,000 (initial projection $1,023,000) |
| Homeowner (single) | $793,750 | $542,500 (initial projection $547,000) |
| Homeowner (couple) | $1,178,500 | $816,000 (initial projection $823,000) |
The Age Pension assets test taper rate will increase
This means that pension payments will reduce by $3.00 per fortnight for every $1,000 of assets above the lower assets test threshold. Currently, the taper rate is $1.50 (75c each for couples) per fortnight, which means as of 1 January 2017 pensions have reduced at a faster rate.
What assets are taken into account?
The market value of most of your assets is taken into account when calculating your Age Pension. This includes, but is not limited to, things such as:
- Property (excluding your home)
- Motor vehicles, boats and caravans
- Financial investments
- Superannuation if you’re over Age Pension age
- Business assets
- Household contents and personal effects.
Find out more about which assets are assessable on the Department of Human Services website.
Upside to losing your benefits
People who lose their Age Pension in 2017 as a result of the changes will automatically be entitled to receive a Commonwealth senior’s health card and/or a low income health care card. These cards will provide access to things such as Medicare bulk billing and less expensive pharmaceuticals.
Preparing for the changes
Depending on how the changes may impact you, there are a number of things worth exploring and talking to your financial adviser about, including:
- How you might replace any lost income if your entitlements are reduced
- How you might be able to trim down your assets to retain your current entitlements—for example, gifting within annual limits, moving savings into a spouse’s super, or bringing holidays or home renovations forward
- How strategies outside of asset reduction may be able to help—working for longer or reviewing your budget in retirement.
Please feel free to start a conversation with us and set up a time to come in so we can discuss how these changes could affect you and put plans in place going forward.
You need to consider with your financial planner (or adviser), your objectives, financial situation and your particular needs prior to making an investment decision. Sensibly Pty Ltd and its authorised representatives (or credit representatives) do not accept liability for any errors or omissions of information supplied on this website
Nick Shanley, Steve May, Luke Styles and Shanley Financial Planning T/A Steve May Financial Services are Authorised Representatives / Corporate Authorised Representative of Sensibly Pty Ltd, AFSL 533923. Please refer to our website at www.stevemayfs.com.au to reference our Financial Services Guides.
