Aged Care Insights | Changes to the Age Pension assets test effective 1st January 2017
It is estimated that more than 300,000 Australians will lose some or all of their Age Pension entitlements from 1st January 2017. On the flip side, approximately 50,000 Australians will become eligible for a full Age Pension from the same date. This is due to two key legislative changes; namely:
- A higher taper rate for part pension entitlements.
- Higher assets test thresholds to obtain the full pension.
The taper rate determines how much your pension will reduce once certain thresholds are exceeded. At present, the taper rate is $1.50 per $1,000 worth of ‘excess’ assets. This means that for every $1,000 over the threshold, your pension entitlement currently reduces by $1.50 per fortnight.
From January 2017, the taper rate will be increased to $3.00 per fortnight for every $1,000 over the threshold. So the reduction in pension entitlement will effectively double for those who exceed the thresholds.
The effect is that the maximum value of assets a person can own in order to receive a part pension will be reduced. Specifically:
- Single home owner reduced from $793,750 to $542,500.
- Couple home owner reduced from $1,178,500 to $816,000.
- Single non-home owner reduced from $945,250 to $742,500.
- Couple non-home owner reduced from $1,330,000 to $1,016,000.
The good news is that more people will be entitled to a full age pension from 1st January 2017. This is because the assets-test free threshold will increase. Specifically:
- Single home owner increased from $209,000 to $250,000.
- Couple home owner increased from $296,500 to $375,000.
- Single non-home owner increased from $360,500 to $450,000.
- Couple non-home owner increased from $448,000 to $575,000.
Keep in mind that the entitlement to a full or part pension is also dependant on meeting the Age Pension Income Test. The rules for this test remain unchanged.
Please contact our office if you have any questions in relation to your pension entitlements, or the new legislation.
Lex Goldsmith | November 2016
