Changes to the Assets Test for the Age Pension

There are some changes to the Asset Test for the Age Pension in the 2015 budget. These will become effective on 1 January 2017. What does it mean for you? Here’s a quick summary of the changes and some key questions and answers.

Remember, two tests are used when calculating your Age Pension entitlement - an Income Test and an Asset Test. The test that results in the lower rate of pension applies. If your Age Pension is determined under the Income Test, the information provided below may not apply to you.

To receive a full pension:

From 1 January 2017, the Government will increase the assets test limit to qualify for a full pension, from $291,500 to $375,000 for couples (and from $205,500 to $250,000 for single people).

This means that more Australians will be eligible for the full Age Pension.

To receive a part-pension:

The pension amount you lose for owning assets above the full Age Pension threshold will increase.

Currently, your pension rate reduces by $1.50 per fortnight for every $1,000 over the limit. So if you’re $10,000 over the limit your rate of pension is reduced by $15 per fortnight. This is sometimes referred to as the ‘taper rate’.

When these changes take effect from 1 January 2017, your pension will be reduced by $3 per fortnight for every $1,000 of assets you own over the full Age Pension threshold.

Maximum limits before your pension is cut-off:

Because your pension is cut at a faster rate for having more assets, it is estimated that the ‘upper limit’ to receive a part-pension and the associated benefits will decrease from $1,156,500 to $823,000 for couples (and from $779,000 to $547,000 for single people).

How much pension will you receive with different levels of assets?

The following tables give you an idea of how much you may receive with different levels of assets:

Single pensioner

Homeowner                 Non-homeowner              Rate of pension

$250,000.00                  $450,000.00                         $891.00

$300,000.00                  $500,000.00                         $741.00

$350,000.00                  $550,000.00                         $591.00

$400,000.00                  $600,000.00                         $441.00

$450,000.00                  $650,000.00                         $291.00

$500,000.00                  $700,000.00                         $141.00

$547,000.00                  $747,000.00                         $0

Pensioner couple

Homeowner                 Non-homeowner              Rate of pension

$375,000.00                  $575,000.00                         $671.60

$400,000.00                  $600,000.00                         $634.10

$450,000.00                  $650,000.00                         $559.10

$500,000.00                  $700,000.00                         $484.10

$550,000.00                  $750,000.00                         $409.10

$600,000.00                  $800,000.00                         $334.10

$650,000.00                  $850,000.00                         $259.10

$700,000.00                  $900,000.00                         $184.10

$750,000.00                  $950,000.00                         $109.10

$823,000.00                  $1,023,000.00                      $0

Please note: The figures contained in the tables above are intended as a guide only.

Do you receive a health card if your pension is cut?

Some consolation is that those who lose their Age Pension should automatically be issued with the Commonwealth Seniors Health Card.

The Commonwealth Seniors Health Card is available to those who have reached Age Pension age and it gives you discounts on prescription medicines through the Pharmaceutical Benefits Scheme (PBS). You may also be entitled to other concessions in areas such as health and transport, depending on your State or Territory.

How about the family home?

The Government has kept its commitment to continue to exclude the family home from the assets test.

When do these changes take place?

The announced changes will take effect from 1 January 2017. Importantly, this means you still have time up your sleeve to plan for the impending changes. There are still some legitimate avenues available to reduce your assessable assets for Age Pension purposes.

If this legislation change is going to impact you, why not schedule a meeting with Gerry or Clae today?

Disclaimer

Information current as at 24 September 2015 - This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication. You should read the Product Disclosure Statement (PDS) before making a decision about a product.