For many, entitlement to the Age Pension is not on the agenda. However as rules change, it is good to revisit the “tests” that determine one’s entitlement. It may be relevant for you, your parents or someone whom you may know.
As we close in on the end of 2016, changes to the Asset Test for the Aged Pension are soon to take effect. These were announced way back in the 2015 Federal Budget. These changes may mean the ability to access at least some Age Pension is reduced.
If you are over 65 and in receipt of a full or part Aged Pension, you need to be aware that for every $1,000 owned above the assets test free amount your pension will be reduced by $3 (this was previously reduced by $1.50 for every $1,000).
The thresholds that apply are dependent on whether you are single or a couple, own your own home or not, and are either in receipt of a full or part pension.
For those on full pensions and are single homeowners, the pension starts reducing when assets reach $250,000. For couples it is when their assets reach $375,000. For non-homeowners, it is $450,000 for a single and $575,000 for a couple.
For single homeowners with a part pension, the pension cuts out when assets exceed $542,500 and for a couple it stops when assets exceed $816,000.
For non-homeowners who are single the pension ceases when assets exceed $742,500 and for couples, when assets exceed $1,016,000.
The market value of most of your assets is taken into account when calculating your Age Pension. This includes, but is not limited to, things such as:
For some, there will be little or no effect at all. Many of our clients will have planned that their SMSF would provide them with their income stream in retirement. For others, these changes may impact on their spending patterns and the quality of life they are looking at in retirement.
For those persons currently receiving the age pension and who lose their Age Pension entitlement on 1 January 2017 (because of the tougher Asset Test), all is not lost! You will be issued with a Commonwealth Seniors Health Card and this card is exempt from the usual income test requirements indefinitely.
