March 11, 2016
There is a significant change coming to the Asset Test for age pensioners. From January 2017, the limits on how much assets you can have before the age pension starts to reduce and the point at which eligibility ceases altogether are changing. The table below illustrates the change:
Rates current as at 20 May 2015
From the table above, a home owner couple can currently have assets up to $1,151,500 (in addition to their home) before they cease to be eligible for the age pension. After the change, they will lose the age pension until such time as their assessable assets reduce below $823,000.
The effective impact of the above change is that some people with around $500,000 or more in assets will lose or have a significant reduction in their age pension. The flip side is that for those couples with assets between $286,500 and $500,000 will potentially have a slightly increased pension.
The above changes are going to require many retirees to rethink their expectations about what level of income they live on. This is because the government wants people to use up some of their own capital before they start accessing government support.
Whilst the change is undoubtedly going to be very shocking for some, there is a silver lining. By having the age pension cut out at a faster rate, the flip side is that as your assets reduce in retirement, the age pension you receive can also kick in now at a faster rate. This means that dipping into capital to top up living costs can actually still be very sustainable as the more rapidly increasing age pension compensates for the lost earnings.
As always the actual impact will depend on your particular situation and if you are in any doubt as to how the changes might affect you, you are welcome to contact our office for an appointment.