Age Pension is Changing - are you ready?

Have you made plans for the Changes to the Aged Pension on

1 January 2017

There are significant changes occurring on the 1 January 2017 to the Age Pension.

These changes are going to affect over 400,000 Australians, with 100,000 losing access to the Age Pension and the remainder having their benefit reduced. If you are one of them we can give you some guidance on how to manage your situation, click here to contact us or phone us on (07) 3018 0587.

So, what are the changes?

The changes only affect the Assets Test from 1 January 2017

Homeowner Non-Homeowner Full Pension Pension cut off Full pension Pension cut off Single $250,000* $542,500* $450,000* $742,500* Couple $375,000* $816,000* $575,000* $1,016,000*

The pension rate will be reduced by $3 per fortnight for every $1000 of assets over full pension threshold. This equates to $39 pa for every $1000 of assets over full pension threshold.

*These are estimates based on projected indexation rates, the final amounts will be released on 1 Jan 2017.

What happens if your assets are above the Pension Cut Off Limits?

If your assets are above the Pension Cut Off Rates, you will no longer be eligible to receive the Pension.

If your assets are currently above the new Asset Test cut offs, you will automatically lose your pension on 1 January 2017. Centrelink will send you a letter and let you know that this is happening.

If you are one of the people/couples who lose the pension you will automatically receive either the Commonwealth Seniors Health Care Card or the Low Income Earner Health Card. You will receive these cards for life and will never need to meet the usual income test that applies to these cards.

Having these cards will mean that you will still receive your medications for the reduced price.

What assets are not counted?

As you know the family home is NOT included in the Assets Test.

The only other assets not assessed are:

Prepaid funeral expenses – no limit

Prepaid burial plot – no limit

A funeral bond - $12,500 limit per person

Can also gift $10,000 per annum (financial year) but over any five year period can only gift a maximum $30,000.

Amounts gifted over this limit are counted as assets for a period of five years.

What assets are counted?

Hence, all other assets are tested, eg, home contents, cars, shares, superannuation, investment properties and managed funds etc.

Income Test still also applies but remains unchanged on 1 January 2017

Full pension Pension cut off Single $4,264 pa ($164 pf) $49,873.32 ($1,918.20 pf) Couple $7,592 pa ($292 pf) $76,356.80 ($2,936.80 pf)

Pension is reduced by $0.50 (singles) and $0.25 (each member of a couple) per $1.00 of income over the full pension thresholds.

Cut off thresholds for both Tests are also indexed on 20 March and 20 September each year.

What is Deeming and how does it work?

Financial assets (cash, bank deposits, superannuation accounts (if a super pension is started after 1 Jan 2016) managed funds, shares etc) have their income Deemed.

The Govt sets down the deeming rates and these are varied by the Govt as interest rates change.

The current deeming rates are:

Singles – first $49,200 is deemed to earn 1.75%, any assets over this are deemed to earn 3.25%.

Couples – first $81,600 is deemed to earn 1.75%, any assets over this are deemed to earn 3.25%.

Hence, all investments are treated the same, EXCEPT an investment property which has its own rules. Allocated Pensions commenced before 1 January 2016 are also treated differently.

How is income from an Investment property treated?

Assessable real estate income is the gross income for the property less allowable deductions. For example, you can deduct interest payments, rates and maintenance costs. But it’s not the same as your taxable income, the rental income cannot be reduced by depreciation, borrowing costs eg loan establishment fees or construction costs.

What are the maximum pension payments?

  • Single person $877.10 per fortnight (pf), equals $22,804.60 per annum (pa).

  • A couple $661.20 pf each hence a combined pension of $34,382.40 pa.

The pension is indexed twice a year on 20 March and 20 Sept.

What to do if you are affected?

  • Review your situation to see if your assets can be reduced within the Centrelink guidelines

  • Review how much income you will now need to draw from your investments

  • Review your budget

  • Contact us for assistance, email us by clicking here or phone on (07) 3018 0587.