Centrelink Aged Pension asset test reforms - understanding the changes

As of January 1, 2017, significant amendments to the Age Pension asset test threshold came into effect. It’s expected that the changes will continue to impact hundreds of thousands of Australians as reforms are implemented statewide. 

A general overview

The Government has elected to increase the allowable asset limit for full pensions and has made amendments to the entitlements for those receiving a part pension. While this has resulted in more Australians being eligible for the full pension, it has had a follow on effect by also reducing payments to pensioners, with some losing their payments all together.

How these changes might affect you

There are a number of significant changes that have taken effect with the following statistics provided below applying to homeowners (different asset limits apply to non homeowners).

Let’s take a look at some of the changes:

●      If you have assets that are less than the lower limit ($250,000 for singles and $375,000 for couples) then you may be eligible to receive an increased Aged Pension

●      If your income is between the upper and lower limits, then the amount which you will receive will reduce faster

●      The changes now reduce the pension by $3.00 for each $1,000 over the lower limit

●      If one’s assets are above the new upper limits ($542,500 for singles and $816,000 for couples), no pension will be payable when previously you may have qualified for some.

*Note: the family home does not count towards the asset test and as such will not affect your pension calculations. This is applicable for the examples above.

Below are changes to the asset test relevant to homeowners from 1 January 2017 (different asset limits apply to non homeowners).

Changes to the asset test at 1 January 2017 are:

Minimum limits 20 Sept 2016 1 Jan 2017
Single $209,000 $250,000
Couple $296,500 $375,000
Maximum limits 20 Sept 2016 1 Jan 2017
Single $793,750 $542,500
Couple $1,178,500 $816,000

Strategies to maximise the Aged Pension

There are a number of potential strategies to ensure you receive the most out of your Aged Pension under the new rules. These include:

Non-Concessional Contribution: A strategy that utilises deposits made to a spouse who may be under the Age Pension qualifying age. Some individuals may be able to reduce their assessable assets and income (and increase their eligible Age Pension payment) by making a deposit into their spouse’s superannuation account via a non-concessional contribution. This money could come from sources such as:

●      The super account of the older, Age Pension qualifying spouse;

●      From bank savings; or

●      The sale of an asset.

Gifting: The process of Gifting involves you or your partner transferring (the sale of assets) or giving away assets for less than their market value. In certain situations, Gifting can be used as a means to reduce assessable assets for Centrelink means test purposes.

Centrelink allows the ‘Gifting’ of $10,000 per annum in a financial year and up to $30,000 over a five year period.

Examples of gifting include:

●      Giving a relative a sum of money

●      Selling a property to a friend or relative for less than its value

●      Repaying a loan for which you were a guarantor

●      Putting money into a family trust that you and your partner do not control.

Finally, a point to consider is the family home. Money spent on the home will be exempt, so it could be time to do those renovations or those long overdue repairs that have fallen by the wayside.

Please note: with any of the information provided above, we encourage you to contact your local adviser for additional advice and guidance before making any decisions.

Ensuring your information is current

In order for us to provide you with a comprehensive strategy, tailored to maximise your Aged Pension, it’s vital that the information we have regarding your personal and financial circumstances is accurate. As such, if your circumstances have changed over the past few months we encourage you to contact your adviser and inform them of the changes.

As always, it is important to seek professional advice to ensure your financial plans are relevant for your personal circumstances. Feel free to talk to your adviser to discuss your situation in greater detail.