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The end of the year is just around the corner, and so are the changes to the Age Pension assets test which will affect roughly 400,000 retirees currently receiving a part or full age pension.

THE GOOD

The good news is that the assets test levels will increase which means that you can own more assets before the full age pension is affected.

From 2017 the assets free area will increase to:

  • $250,000 for single homeowners (an increase from $209,000 pre-2017)
  • $450,000 for single non homeowners (an increase from $360,500 pre-2017)
  • $375,000 for couple homeowners (an increase from $296,500 pre-2017)
  • $575,000 for couple non homeowners (an increase from $448,000 pre-2017)

If your assets are below these thresholds, you will be eligible for a full pension, and for many pensioners close to these thresholds, the changes may means that your benefits will increase.

The family home is still exempt from the assets test.

THE BAD

The bad news is that the taper rate for pensioners will also increase, reducing payments for some pensioners and possible cancelling pensions for others.

Currently, for every $1,000 of assets you own above the assets test threshold, your pension is reduced by $1.50 per fortnight.

From 1 January 2017, however, this will double so that pensions will reduce by $3.00 per fortnight for every $1,000 of assets above the assets tests threshold.

The greater taper rate means that the current levels of assets you can have in order to receive a part pension will decrease, leaving many self-funded retirees to draw more money on their own investments and superannuation.

Part pensions will cancel when assets are more than the following amounts:

  • $542,500 for single homeowners (compared to the pre-2017 asset limit of $793,750)
  • $742,500 for single non homeowners (compared to the pre-2017 asset limit of $945,250)
  • $816,000 for couple homeowners (compared to the pre-2017 asset limit of $1,178,500)
  • $1,016,000 for couple non homeowners (compared to the pre-2017 asset limit of $1,330,000)

WHAT TO EXPECT

If you are currently receiving the maximum rate of pension, your payment will not change.

If you receive an increase due to these changes, this will happen automatically.

If your pension is reduced due to these changes, you will be sent a letter from the Department of Human Services (DHS) – you do not need to contact them.

If you are losing the pension in full, you will be sent a letter from DHS and your Concession Card will be cancelled. You will however be sent a  non-income means tested Low Income Health Care Card or Commonwealth Seniors Card if you are over the Age Pension age (these card will provide access to things such as Medicare bulk billing and less expensive pharmaceuticals).

BE PREPARED

With less than one month to go until the changes kick in, there is no time like the present to start planning. Being prepared will reduce stress and anxiety and keep you in control of your finances.

There are some things you can do to prepare your finances

  • Do the sums and work out if you are going to lose money. If so, calculate how much you will lose and how it will affect your overall income.
  • Review your budget and check if there are any savings you can make, or any expense that you can cut back on or adjust.
  • Check your cash reserve and make sure it is high enough to make up for the loss of income from the pension.
  • Think about the long-term. While you may be losing your pension at the end of this year, in a few years’ time your assets may have reduced enough to see you qualify for the pension again (although you need to keep an eye on the income test).

Experts are however warning that you do not go out and sell your assets in a hurry – selling your assets under pressure can be stressful and you could be sacrificing some of the value of your asset.

THERE IS HELP AT HAND

If you are finding it difficult to work out on your own, there is help you can seek. Local Centrelink offices are running basic seminars about the changes, or, if your circumstances are more complex we have many years’ experience assisting people with asset structuring and advice.

About the authors:

This article has been co-authored by Claudia Giovannini and Steven Brown at Lynn & Brown Lawyers.  Claudia is currently studying law at UWA and hopes to be admitted as a Perth lawyer in or about 2018.  Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.

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