Beginning January 2017 a reduction to the current asset threshold for the Age Pension will be implemented. For many, this will result in the loss of, or reduction to, Centrelink entitlements. To help you understand the impact on your situation, we have broken down the changes below.
What are the changes?
Centrelink determines your Age Pension entitlement via your assets and income. The asset thresholds are being reduced from 1 January 2017.
Who is impacted?
The change to the asset threshold will impact people receiving Age Pension, along with those applying for Age Pension in future.
To receive a full pension –
For a couple, assets need to be under $375,000; for singles, under $250,000. If you own a home, its value is not counted as an asset.
If you are not a homeowner, your assets need to be under $575,000 for a couple or under $450,000 for a single person.
To receive a part pension –
Provided assets remain under $823,000 for homeowner couples and $547,000 for single homeowners you will continue to receive a part pension and concession card.
If your assets exceed the above thresholds you will lose your pension from 1 January 2017.
Will I keep my concessions?
If you lose your Age Pension as a result of these changes, you will automatically receive the Commonwealth Seniors Health Card. Additionally, you will be exempt from the usual income test requirement for this card. Other concessions such as reduced utility bills and car registration will not apply, however an annual payment of up to $551 for couples and $366 for singles will be made.
Can I reduce my assets?
There are limited ways you can reduce your assets to assist in retaining your pension:
You can gift some money or assets, however the gifting of money or assets is limited to a total of $10,000 per financial year and a maximum of $30,000 over a 5 year period.
Any funds spent on improvements to your principal home are not considered assets.
If your spouse is under age pension age, you can contributing some of your assessable financial assets to their superannuation. Doing this can assist in reducing your assets until your spouse is of age pension age. This is a short term benefit, but it could potentially allow for the continuation of your pension and concessions past 1 January 2017.
Having an annuity investment can also assist in reducing the assessable asset values, for Centrelink purposes. It is, however important you consider all the positives and negatives of annuity structures before implementing this strategy.
What can I do?
Even with 2017 approaching, there is still time to consider your options in the lead up to the implementation of these changes.
If your assets are greater than the new threshold and you are at risk of losing your pension, it is important you consider the impact this will have on your cash flow and how any loss could be replaced.
If you have any questions about these Centrelink changes and how it could impact you, feel free to contact our office.