Centrelink rule changes 1 January 2017

The new rules that will change the asset test thresholds and pension taper rate that were first announced in the 2015-16 Federal budget are nearly upon us. Who is affected and what strategies remain to lessen any negative impact for affected pension recipients?

The measures will mean that from 1 January 2017 (according to Treasury estimates) approximately 50,000 part-pensioners will now receive the full pension while approximately 91,000 current part-pensioners will lose their pensions totally and a further 235,000 will have their part-pension reduced.

Some part-pensioners will qualify for a full pension from 1 January due to an increase in the asset test thresholds:

centrelink-rule-changes-table-1

But other pension recipients with asset levels above the current indexed thresholds shown below will be affected by the increasing taper rate which will now reduce the pension by $3.00 per $1,000 of assessable assets above the threshold (increased from $1.50) meaning the pension will cut out at a lower level of assessable assets.

centrelink-rule-changes-table-2

Please note these figures have been indexed above the current thresholds provided by the Department of Human Services to more accurately show where the actual thresholds will land from 1 January 2017.

Examples of how people will be affected

By way of example, this means that a homeowner couple with up to $451,500 of assessable assets will either have no change or benefit from a slight increase in their pension (assuming they are assessed under the assets test).

However, a couple with $823,000 of assessable assets would go from $14,467 p.a. of joint pension to zero.

Likewise, a single recipient with assessable assets up to $289,500 would be unaffected.

However a single recipient with $547,000 of assessable assets would lose $10,042.00 p.a. in pension entitlements.

How can you reduce your assessable assets?

Some strategies to reduce your assessable assets could include:

  1. Contribute to super in the name of a spouse under Age Pension age;
  2. Ensure non-financial assets are appropriately valued (i.e. value personal items at “fire sale” value, not their insured value);
  3. Increase withdrawals for lifestyle spending or to make capital improvements to your principal home;
  4. Gift money to your children (you can gift up to $10,000 each financial year or up to a maximum of $30,000 over a rolling five year period without impacting your pension);
  5. Invest in a funeral bond or for pre-paid funeral expenses; and
  6. Invest in a lifetime annuity that has a reducing asset value.

Of course, speak with your financial adviser prior to implementing any strategies so the implications of the new rules can be fully assessed for your personal situation.

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