"we take away the confusion surrounding retirement, and provide certainty around cashflow and lifestyle"
Changes to the Age Pension Assets Test from
1 January 2017
For those clients currently receiving Age Pension entitlements, you would have recently received a letter from Centrelink called "Rebalancing the Assets Test", which outlines the changes to the Age Pension asset test from 1 January 2017.

The two changes are:
  • an increase in the 'asset free areas' for both homeowners and non-homeowners
  • an increase in the assets test taper rate from $1.50 per fortnight to $3.00 per fortnight, for every $1,000 of assessable assets over the asset free area

These changes will result in a significant reduction in the upper assets test threshold, and see many clients current Age Pension entitlements reduced or eliminated from 1 January 2017.

 

The tables below outline the potential Age Pension changes, for both couple homeowners and single homeowners:

 

 

For those clients assessed as a couple homeowner, if you have assessable assets above $453,500, your Age Pension entitlements will reduce from 1 January 2017, and reduce completely if your assessable assets are above $816,000.

For those clients assessed as a single homeowner, if you have assessable assets above $291,000, your Age Pension entitlements will reduce from 1 January 2017, and reduce completely if your assessable assets are above $542,500.

What are assessable assets for Centrelink purposes?


 

For most clients, assessable assets would be considered as:


 

  • Home Contents
  • Motor Vehicles, Caravans, Boats, Motorbikes
  • Holiday homes or investment properties
  • Cash at bank, term deposits
  • Shares or Managed Funds
  • Superannuation Pensions or super in the accumulation phase if the owner is over Age Pension age

For the full list of assessable and exempt assets, you can visit the Centrelink website at



Action required

Clients that fall within the asset levels where they will see a fall in their ongoing Age Pension entitlements, the following options may be considered to help reduce their assessable assets:

 

  1. Purchase funeral bonds, up to $12,500, which are exempt from asset test assessment
  2. Buy a more expensive principal residence
  3. Undertake home improvements
  4. Pre-pay a holiday
  5. Gift up to $10,000 per financial year, or $30,000 over a rolling 5 year period
  6. Couples with a spouse under Age Pension age, may look to withdraw part of the older partner's super, and recontribute back into super for the younger spouse, to shelter these assets from assessment, until the younger partner reaches Age Pension age
  7. Purchase a lifetime annuity, which are assessed as 'long term income streams' that are not subject to deeming, and have a reducing asset value

 

Even with these strategies, some clients may be unable to sufficiently reduce their assessable assets to a level that would allow them to retain an Age Pension entitlement from 1 January 2017. Those clients will automatically be eligible for the Low Income Health Care Card, and those over Age Pension age will also be eligible for a Commonwealth Seniors Health Card. They will never be income tested and will retain the card indefinitely (provided they continue to meet all other eligibility requirements.

 

The Low Income Health Care Card provides cheaper medicines under the Pharmaceutical Benefits Scheme; as well as other concessions offered by private companies; plus state and territory government and local council concessions, such as energy and electricity bills, health care costs (including ambulance and dental and eye care), public transport costs, educational fees, and water rates.

 

The Commonwealth Seniors Health Card provides similar benefits to the Low Income Health Care Card, in regards to medical and government concessions or discounts.

 

For those clients that will retain their Age Pension entitlements, but at a reduced level, you will need to consider your ongoing living expenses and cashflow position, and consider where you are able to draw additional monies from to keep your ongoing cashflow unchanged (i.e. increased super drawings, cash at bank, selling shares).

 

As the changes will come into force shortly, we recommend that you contact us to discuss how the changes will affect you personally, and any changes that may need to be implemented prior to 1 January 2017.

 

Please note, these changes will also affect those clients on other Centrelink pensions, including Disability Support Pensions and Carer Payments.

 

  

Until next time,

JD signature

Jonathan Dunne CFP DipFP JP
Authorised Representative for
Financial Wisdom Limited


IPS Wealth Management | 02 4926 2922 | jonathan@ipsnsw.com.au| www.ipswealth.com.au
"Our business is built on referrals" 
Important Information:
 
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.
 
IPS Wealth Management is an Authorised Representative of Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.
STAY CONNECTED: