On 7 May 2015, the Federal Government announced changes to the Age Pension assets test, affecting those retirees receiving a Centrelink Age Pension.
The assets test thresholds for claiming the full Age Pension will increase, which means an estimated 50,000 extra Australians will be eligible for the full Age Pension. However, the assets test threshold for claiming a part Age Pension will fall, which means an estimated 300,000 Australians will lose Age Pension entitlements, with 100,000 of those retirees losing all entitlements.
The announced changes are now law and take effect from 1 January 2017.
How do the Age Pension rules work generally?
The Age Pension assets test (also known as the Centrelink assets test) is a means test that assesses the value of the assets you own against asset thresholds, and determines your eligibility for the Age Pension and other social security payments.
An eligible individual must satisfy the Age Pension income test, and the Age Pension assets test to receive a full, or part, Age Pension. The amount of Age Pension will be based on the test that delivers the lowest amount of Age Pension entitlement. If an individual fails one of the tests, then he or she will not be eligible for the Age Pension.
What are the changes to the Age Pension assets test?
The new Age Pension assets test will operate as follows.
Higher threshold for full Age Pension: The assets-test free threshold will increase from $209,000 for a single person who is a home-owner to $250,000, and for a home-owning couple, increase from $296,500 to $375,000. The assets-test free threshold is the measure for the full Age Pension, that is, when your assets, excluding the family home, are worth less than the threshold. You are then entitled to the full Age Pension, assuming you also meet the Age Pension income test.
Harsher taper rate for part Age Pension entitlements: The taper rate for the assets test, which determines how much Age Pension you receive, will reduce your Age Pension entitlement by $3 a fortnight for every $1000 of assets you own over the full Age Pension threshold, taking effect from 1 January 2017. Currently, the taper rate is $1.50 per $1,000 of assets over the full Age Pension threshold. In effect, the part Age Pension threshold will be cut by $362,500 on current threshold levels for home-owning couples and cut by $251,250 for single home-owners,
As a homeowner couple, if you currently receive the Age Pension, and you own more than $816,000 in assets including super and all other assets (but excluding your home), then you will no longer receive the Age Pension from 1 January 2017. For those Age Pensioner home-owning couples who own less than $816,000 in assets, but more than $450,000 in assets, then your Age Pension entitlements will be fall from 1 January 2017.
Likewise, as a homeowner single person, if you currently receive the Age Pension, and you own more than $542,500 in assets including super and all other assets (but excluding your home), then you will lose your Age Pension entitlements from 1 January 2017. For those Age Pensioner home-owning single people who have less than $542,500 in assets but more than $289,500 in assets, then your Age Pension entitlements will be fall from 1 January 2017.
Note: Higher assets test thresholds apply for Age Pensioners who don’t own their own home.
What are the Age Pension assets test thresholds from January 2017?
In the tables below, we outline the full Age Pension thresholds (Table A), and also in Table B, we outline what the current Age Pension assets test thresholds are, and what the upper asset thresholds (for part Age Pension eligibility) will be as at 1 January 2017.
Table A: Age Pension lower assets test thresholds (for full Age Pension)
| Homeowner | Non-homeowner | |||
| Until 31 December 2016 | From
1 January 2017 |
Until 31 December 2016 | From 1 January 2017 | |
| Single | $209,000 | $250,000 | $360,500 | $450,000 |
| Couple | $296,500 | $375,000 | $448,000 | $575,000 |
In Table B below, we outline what the current Age Pension assets test thresholds are, and what the upper asset thresholds (for part Age Pension eligibility) will be as at 1 January 2017.
Table B: Age Pension upper assets test thresholds (for part Age Pension)
| Homeowner | Non-homeowner | |||
| Until 31 December 2016 | From
1 January 2017 |
Until 31 December 2016 | From 1 January 2017 | |
| Single | $793,750 | $542,500 | $945,250 | $742,500 |
| Couple | $1,178,500 | $816,000 | $1,330,000 | $1,016,000 |
No Age Pension, but eligible for Commonwealth Seniors Health Card: According to the Explanatory Memorandum accompanying the legislation introducing the Age Pension assets test changes, “Those whose pension is cancelled will automatically be issued with a Commonwealth Seniors Health Card, or a Health Care Card for those under pension age [and receiving a different Centrelink benefit], without the need to meet the usual income requirements.Veterans whose service pension is cancelled under this measure will retain their Veterans’ Affairs Gold Card.” The Federal Government legislation does not deal with state-based concessions, such as rate and utility discounts. You will need to check with your council and service providers, since these concessions are provided by the states.
Warning: The harsher assets test also applies to other social security pensions, including disability support pension, wife pension, carer payment, bereavement allowance, widow B pension and certain pensions administered by the Department of Veterans’ Affairs. According to the revised Explanatory Memorandum accompanying the legislation, the assets test also applies to parenting payment and allowances (widow allowance, youth allowance, austudy payment, newstart allowance, sickness allowance, special benefit and partner allowance).
What options are available for reducing your assessable assets?
Some options and strategies to reduce your assessable assets could include:
- Contributing to super in the name of a spouse under Age Pension age
While you are under Age Pension age, money that you have in super in the accumulation phase is not counted under the assets test. There is an opportunity to consider for couples with a gap in age, where only one partner currently receives the pension.
- Improving the principal home
Funds spent on home improvements and renovations are generally not assessed against your pension. So it may be time to update that kitchen…for the good of your pensions!
- Gifting early
You can gift up to $10,000 each financial year or up to a maximum of $30,000 over five years without impacting your pension.Importantly, there is nothing stopping you from gifting a larger amount above these limits five years before you reach your Age Pension age. The gifting rules apply to any gifts made in the five years prior to receiving a pension or allowance.
- Lifetime annuities that have a reducing asset value
A lifetime annuity is an investment that provides you with a regular income throughout your lifetime. Initially, the full amount that you invest in the annuity is assessed by Centrelink. However, these types of annuities can have a reducing asset value, meaning every six months (or year where yearly payments are made) an amount is subtracted from the asset value used by Centrelink to calculate your entitlement.