Smaller piece of the pie for part pensioners
Changes to the age pension asset test that took effect on 1 January 2017 may have come as a rude shock to many seniors who currently receive a part pension, the advocacy group National Seniors has warned.
The new asset tests, which were set in motion by the 2015 federal budget, are expected to see roughly 200,000 people receive lower part pension payments this year and 100,000 lose pension payments altogether.
“Many people are still unaware if or how the assets test changes will impact their payment rates,” said National Seniors Chief Executive Dagmar Parsons late last year. “Those close to the cut off limits would need to act quickly and adjust their affairs in the next couple of months, if doing so is right for their circumstances.”
Higher thresholds for full pension eligibility
On the plus side of the changes, the amount of assets seniors can have and still receive the full pension has gone up.
A single home-owning pensioner with assets worth less than $250,000 is now eligible for the full pension.
Before the change, you had to have assets worth less than $209,000 to qualify.
The full pension is also now available to:
- homeowner couples with assets worth less than $375,000 (up from $296,500)
- non-homeowner singles with assets worth less than $450,000 (up from $360,500)
- non-homeowner couples with assets worth less than $575,000 (up from $448,000).
For each $1000 worth of assets you have above the full pension threshold, your fortnightly pension payment will be cut by $3 – the taper rate.
The previous taper rate was $1.50 per $1000.
The higher thresholds are expected to make about 50,000 Australian newly eligible for the full pension.
Superannuation is included in the asset test (along with assets like property, cars, boats, caravans, other investments, and household contents and valuables) but the family home will remain exempt.
Lower pension cut-off points
Those with more assets, on the other hand, will now receive less money from the government than they did before the change. The new lower part-pension thresholds are expected to see about 100,000 age pensioners lose payments altogether.
New cut-off points currently in effect
|Home and family status
||Current cut-off point
||Cut-off point as
of 1 January 2017
| Non-homeowner couple
To cushion the blow, seniors who stand to lose pension payments from 1 January 2017 will receive a Health Care Card and those over age pension age will also get a Commonwealth Seniors Health Card without having to meet income requirements.
These concession cards allow access to benefits like bulk billing and discounted medicines as well as other potential discounts.
Bracing for the part pension change
There are a number of steps you can take to potentially avoid having your part pension payment reduced or to limit its reduction going forward, but you should seek trusted information by calling National Seniors’ Financial Information Desk on 1300 020 110 or email email@example.com.
- Reducing your assets: You may be able to reduce the amount of assets you have on hand by gifting money to your children or other loved ones. Current limits are $10,000 per year for both singles and couples, and no more than $30,000 over a five year period. Any sums above these limits will be subject to the means test, meaning in effect that they will still be counted as your assets and affect your part pension eligibility.
- Putting savings in a partner’s super if they are under age pension age: Money held in the accumulation phase of superannuation while under age pension age is exempt from the pension assessment. Additionally, if you pay income tax and your partner is a low income earner or currently not working, you can make after-tax contributions to their super fund and you may get a tax offset.
- Spending your assets: If you’ve been putting off a big expense that will likely pay dividends down the road like home renovation, now may be the time to do it. Purchasing a prepaid funeral or funeral bonds may also assist in reducing your assets.