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Will the 2017 Age Pension Changes Affect You?

On 22nd June 2015 legislation quietly passed through Parliament that will affect the retirement income of hundreds of thousands of Australians and many future retirees who were expecting to receive a part pension. Changes to the way in which Centrelink determines your entitlement to the Age Pension will commence on 1st January 2017, resulting in the partial or total loss of Age Pension for many, whilst others will enjoy a modest increase.

Changes are to the Asset Test, where thresholds and taper rates that determine the amount of Age Pension you receive, will change.

Currently a couple can have Centrelink assessable assets (excluding their home) of $1,163,000 and singles $783,500 and receive a $1 of Age Pension. From 1st January 2017 this limit will reduce to $823,000 for couples and $547,000 for singles. At the lower asset end, currently a couple can have Centrelink assessable assets of $291,500 and singles $205,500 and receive the full Age Pension. From 1st January 2017 this limit will increase to $375,000 for couples and $250,000 for singles, meaning some people who currently get a part pension will receive the full Age Pension.

For those people with assets above the lower thresholds of $291,500 for couples and $205,500 for singles, their entitlement to the age pension will currently be reduced by $1.50 for every $1,000 over the lower threshold. Changes to the taper rate from 1st January 2017 will change this reduction to $3 for every $1,000 over the lower threshold, meaning a greater reduction.

Set out below are tables showing the effect of these changes on the Age Pension people will receive, depending on their level of Centrelink assessable assets. Examples of Centrelink assessable assets are your home contents, motor vehicles, caravan, boat, cash in bank accounts, term deposits, rental property, holiday home, shares and account based pension income streams. Note that the home you live in is not included as an asset.

Couple Combined

Assessable
Assets
September 2015 Age Pension P/Fnight 2017 Estimated Age Pension P/Fnight Annualised Increase /(Reduction)
$200,000 $1,307.00 $1,343.20 $941.20
$300,000 $1,294.25 $1,343.20 $1,272.70
$400,000 $1,144.25 $1,268.20 $3,222.70
$500,000 $994.25 $968.20 ($677.30)
$600,000 $844.25 $668.20 ($4,577.30)
$700,000 $694.25 $368.20 ($8,477.30)
$800,000 $544.25 $68.20 ($12,377.30)
$823,000 $509.75 $0 ($13,253.50)
$900,000 $394.25 $0 ($10,250.50)
$1,000,000 $244.25 $0 ($6,350.50)
$1,100,000 $94.25 $0 ($2,480.50)
$1,200,000 $0 $0 $0

Singles

Assessable
Assets
September 2015 Age Pension P/Fnight 2017 Estimated Age Pension P/Fnight Annualised Increase /(Reduction)
$150,000 $867.00 $891.00 $624.00
$200,000 $867.00 $891.00 $624.00
$250,000 $800.25 $891.00 $2,359.50
$300,000 $725.25 $741.00 $409.50
$350,000 $650.25 $591.00 ($1,540.50)
$400,000 $575.25 $441.00 ($3,490.50)
$450,000 $500.25 $291.00 ($5,440.50)
$500,000 $425.25 $141.00 ($7,390.50)
$547,000 $354.75 $0 ($9,223.50)
$600,000 $275.25 $0 ($7,156.50)
$650,000 $200.25 $0 ($5,206.50)
$700,000 $125.25 $0 ($3,256.50)
$750,000 $50.25 $0 ($1,306.50)
$800,000 $0 $0 $0

(The 2017 estimated pension amounts assume increases to the base age pension payment rate over time)

Note that for non-homeowners or couples separated by illness different rates and reductions will apply.

There are some solutions available to reduce the effects of this change. Gifting money, the purchase of an annuity or spending funds on holidays or home renovations can help. It’s important to note that the options and results will be different for each person and that you should get advice about your specific situation before acting.

Please call us on 6282 0170 to discuss how these changes may affect you.

General Advice Warning: While every care has been taken in the preparation of this information, neither williamgrant Financial Consultants or Neo Financial Solutions Pty Ltd makes any representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. This information has been prepared for the purposes of providing general information, without taking into account any particular investor’s objectives, financial situation or needs. Before making any investment decisions or change to your financial position, you should consider the appropriateness of the information in this document, and financial advice.