2017 Age Pension changes – Are you worse off?

Changes to the Centrelink assets test from 1 January 2017 have impacted many Age Pensioners and other pension recipients.

What are the Changes?

From 1 January 2017 the lower threshold (above which a pension begins to be reduced) has been increased – but at the same time, the taper rate (the rate of reduction in the pension if your assets exceed the lower threshold) was doubled.

This has resulted in the upper threshold being reduced, and fewer people getting a part pension.

The old and new thresholds are as follows:

Home-owner

Couple

Home-owner

Single

Non Home-owner

Couple

Non Home-owner

Single

Old Lower Threshold

(full pension)

$296,500 $209,000 $448,000 $360,500

New Lower Threshold

(full pension)

$375,000 $250,000 $575,000 $450,000

Old Upper Threshold

(no pension)

$1,178,500 $793,750 $1,330,000 $945,250

New Upper Threshold

(no pension)

$816,000 $542,500 $1,016,000 $742,500

The assets test includes most assets, other than your family home and superannuation if you are under age pension age.

 

The Winners

Pensioners with relatively low assets have benefited as a result of the increase in the lower threshold. (e.g. a homeowner couple with less than $453,500 of assets).

Also, it has become easier to claim a Centrelink ‘Allowance’ such as Newstart, due to the lower cut-off threshold.

 

The Losers

Much of the debate around the changes have focused on the millionaire pensioners….. and whilst it is true that this group has been cut-off, the biggest impact has been on part pensioners with assets equal to the new upper threshold.

The following table shows the tipping point where pensioners have become worse off.

  Tipping Point Biggest Losers Pension lost for Biggest Losers
Homeowner Couple $453,500 $816,000 $14,210 pa
Homeowner Single $291,000 $542,500 $9,858 pa
Non-Homeowner Couple $702,000 $1,016,000 $12,319 pa
Non-Homeowner Single $539,500 $742,500 $7,967 pa

If your assets exceed the tipping point, you will have had a reduction in your entitlement.

 

What can you do about it?

  • It’s worthwhile reviewing the value that Centrelink have recorded for non-financial assets such as your home contents, motor vehicles and other personal effects. As anyone who’s trying to sell second hand goods would know, the market value is often lower than you would expect.
  • Gifting money is effective but subject to strict limits ($10,000 per financial year, and no more than $30,000 over five years).
  • If you are planning to spend money on home improvements, or considering other spending on travel etc, you may have extra incentive to do these things sooner rather than later.
  • Other strategies of investing in exempt assets will be effective for some people, but you should seek professional advice first.

 

I also caution against any temptation to spend recklessly, or give assets away unnecessarily. Blowing $10,000 will only get you a maximum of $780 per annum extra pension.

Remember, Centrelink rules are complex, and we have only looked at the impact of changes to the assets test. You also have to contend with the income test and other qualification rules.

If you’d like to discuss the impact on you, please call us on (08) 8232 9498.