The commencement of the 2017 calendar year will see some major changes for the means testing of pensions and provides significant opportunities for financial planning advice. On the positive side, the lower pension asset test thresholds (also known as the assets test free area) will increase from 1 January 2017 resulting in around 50,000 part pensioners qualifying for a full pension. On the negative side, the assets test taper rate will increase from $1.50 per fortnight for every $1,000 above the asset threshold to $3 per fortnight. This effectively unwinds the change made in 2007 where the taper rate was reduced from $3 to $1.50. It is estimated that approximately 91,000 part pensioners will no longer qualify for the pension and a further 235,000 will have their part pension reduced.
The actual impact of these changes will depend on the pensioner’s relationship status, homeowner status and whether they are asset tested or income tested. Couple pensioners may lose up to $14,467 pa (combined) in benefits as a result of these changes.
Those that have their pension cancelled as a result of these changes will automatically be issued with a Commonwealth Seniors Health Card (CSHC), or a Health Care Card (HCC) for those under pension age, without the need to satisfy the usual income requirements. Veterans whose service pension is cancelled as a result of these changes will retain their Veterans’ Affairs Gold Card.
Increased lower asset test threshold
From 1 January 2017, the lower asset test threshold will increase. Pension payments are reduced once assets exceed the lower threshold.
For a single homeowner, the current threshold of $205,500 will increase to $250,000
For a single non-homeowner, the current threshold of $354,500 will increase to $450,000
For a couple homeowner, the current threshold of $291,500 will increase to $375,000
For a couple non-homeowner, the current threshold of $440,500 will increase to $575,000
If these proposals raise questions, concerns or potential opportunities for you, please speak with your financial adviser, Chris Harris, today, or contact us on 8304 8088 for an obligation-free discussion.