Changes to the asset test thresholds and associated taper rate will affect an estimated 416,000 age pensioners – will you be one of them?
On 1 January 2017, the asset thresholds and taper rate that apply to the Age Pension asset test will change. This will result in the most significant alteration to retirement income this decade.
The asset free threshold is the value of assets that an individual or couple can own before their Age Pension payment is affected. For every $1000 worth of assets held above this threshold, the Age Pension payment is reduced by $1.50 until no payment is due.
From 1 January 2017, not only will the upper threshold reduce, meaning fewer people will qualify for a part Age Pension, the taper rate will also increase to $3 for every $1000 by which the asset free threshold is exceeded, meaning the Age Pension payment will reduce to $0 more quickly.
So, what are the current thresholds and what will they be from 1 January 2017 onwards?
|
Prior to 1 January 2017 |
From 1 January 2017 |
|||
|
|
Asset free threshold |
Pension cut-off threshold |
Asset free threshold |
Pension cut-off threshold |
|
Homeowner |
|
|
|
|
|
Single |
$209,000 |
$793,750 |
$250,000 |
$542,500 |
|
Couple (combined) |
$296,500 |
$1,175,000 |
$375,000 |
$816,000 |
|
Non-homeowner |
|
|
|
|
|
Single |
$360,500 |
$943,250 |
$450,000 |
$742,500 |
|
Couple (combined) |
$448,000 |
$1,326,500 |
$575,000 |
$1,016,000 |
What if you lose your Age Pension due to the threshold and taper rate changes?
Those who are no longer eligible for the Age Pension will automatically receive a Commonwealth Seniors Health Care (CSHC) card to help with the costs of prescription medicines, utility bills, rates, etc. The recipients of these CSHC cards will be exempt, indefinitely, from the income thresholds usually applied.
How many people will be affected?
It has been claimed that 170,000 pensioners will be better off, with 50,000 currently receiving a part Age Pension expected to receive a full Age Pension once the thresholds have been changed. A further 120,000 on a part Age Pension can expect their payment to increase by $30 per fortnight. These changes will also see 91,000 lose their Age Pension entitlement and about 235,000 see their part Age Pensions reduce.
Can I get rid of assets before then?
Generally, yes you can, but if you’re already in receipt of an Age Pension, or planning to claim and Age Pension within the next five years, you should be aware of gifting rules and how they might affect your Age Pension assessment. You should also consult an independent financial advisor to ascertain the best way to structure your finances to maximise your income.
Updated 13 September 2016
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