Changes to the Age Pension rules – how will you be affected?

From 1 January 2017 Government changes to the Age Pension are likely to reduce pensioner entitlements. 
Increase in the Assets Test (lower) threshold
The Assets Test threshold is the amount of assets pensioners can hold before their pension starts to reduce under the Centrelink Assets Test. The table below shows the new thresholds from 1 January 2017. Depending upon your situation, to get the maximum age pension, you total assets need to be below the following thresholds:

  • Single, homeowner = $250,000
  • Single, non-homeowner =  $450,000
  • Couple, homeowner = $375,000
  • Couple, non-homeowner = $575,000

Increase in the taper rate
The taper rate is the rate at which the Age Pension reduces as assets increase. From 2017 the taper rate will increase from $1.50 a fortnight to $3 a fortnight. This means the maximum Age Pension a pensioner can receive will be reduced by $3 per fortnight for every $1,000 of assets they hold above the Assets Test threshold (as shown above).
How changes could affect your Age Pension

  • Age Pension recipients with an asset value ‘around’ the thresholds are likely to see an increase in their Age Pension entitlement, and
  • Age Pension recipients with assets above the threshold are likely to see a reduction in their Age Pension – in some cases to zero – as a result of the increased taper rate.

Example
Retired couple Betty and John are both 68 years old and own their home. They have $823,000 in total assets and currently receive a part Age Pension of $500 per fortnight. If their assets remain unchanged on 1 January 2017, their Age Pension is estimated to reduce to zero.
(Based on information released by the Government and can be found at – http://www.liberal.org.au/latest-news/2015/05/07/fairer-access-more-sustainable-pension.)
Speak to your Financial Planner
The changes to the Age Pension can affect pensioners in a number of ways. To find out more about the likely impact of these changes on your entitlements and to explore strategies to help reduce the impact, speak to your financial planner.
Information is current at the date of issue and may change. This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent.

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Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

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