Changes to the Age Pension rules – Are you ready?

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From the 1st January 2017 Government changes to the Age Pension are likely to reduce pensioner entitlements. It’s important that you understand how the changes could affect you.
Increase in the Assets Test 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 new thresholds from 1st January 2017 are as follows:

  • Single, homeowner has an Assets Test threshold of $250,00
  • Single, non-homeowner has an Assets Test threshold of $450,000
  • Couple, homeowner has an Assets Test threshold of $375,000
  • Couple, non-homeowner has an Assets Test threshold of $575,000

Increase in the ‘taper rate’
The taper rate is the rate at which the Age Pension reduces as assets increase. From 1st January 2017 the taper rate will increase from $1.50 a fortnight to $3.00 a fortnight. This means the maximum Age Pension a pensioner can receive will be reduced by $3.00 per fortnight for every $1,000 of assets they hold above the Assets Test threshold.

How the changes could affect your Age Pension
The higher the Assets Test thresholds will generally mean:

  • 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 increase taper rate.

The combined effect of these changes
The combined effect of these changes is that while some pensioners will see either no change to or an increase in their age pension, many will see their age pension reduced, possibly to zero. The Government estimates that this measure will see 91,000 part-pensioners lose their age pension completely while another 235,000 part-pensioners will see their age pension reduced. The likely impact of these changes to a pensioner couple who own their home are:

  • Assets of $300,000 have a current age pension indexed at $34,865 however the new age pension is $34,923, this is a reduction of $59.
  • Assets of $400,000 have a current age pension indexed at $30,965 however the new age pension is $32,973, this is a reduction of $2,009.
  • Assets of $451,000 have a current age pension indexed at $28,956. This amount has not been changed by the new age pension.
  • Assets of $500,000 have a current age pension indexed at $27,065 however the new age pension is $25,173, this is a reduction of $1,892.
  • Assets of $600,000 have a current age pension indexed at $23,165 however the new age pension is $17,373, this is a reduction of $5,792.
  • Assets of $700,000 have a current age pension indexed at $19,265 however the new age pension is $9,573, this is a reduction of $9,692.
  • Assets of $800,000 have a current age pension indexed at $15,365 however the new age pension is $1,773, this is a reduction of $13,592.
  • Assets of $823,000 have a current age pension indexed at $14,467 however the new age pension is $0, this is a reduction of $14,467.
  • Assets of $900,000 have a current age pension indexed at $11,465 however the new age pension is $0, this is a reduction of $11,465.
  • Assets of $1,000,000 have a current age pension indexed at $7,565 however the new age pension is $0, this is a reduction of $7,565.
  • Assets of $1,100,000 have a current age pension indexed at $3,665 however the new age pension is $0, this is a reduction of $3,665.
  • Assets of $1,200,000 have a current age pension indexed at $0. This amount has not been changed by the new age pension.

A Pensioner couple who own their home with less than $451,500 of assessable assets will see either no change, or an increase, in their age pension. Such pensioners with assets above $451,500 will see their age pension fall – in this case by up to as much as $14,467 per year. Single pensioners and non-homeowners may also be affected, but at different levels of assets.

“This article has been provided by Infinity Private Wealth”

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