January 2017 Pension Asset Test changes

January 2017 Pension Asset Test changes

by Christine Hopper

The January 2017 Pension Asset Test changes include new higher Asset Test Allowances and a higher taper rate.

As a result of the January 2017 Pension Asset Test changes some Pensioners could get a higher Pension payment.  But some Pension payment rates will be reduced following the January 2017 Pension Asset Test changes.  Pensioners who are impacted severely by the current Asset Test could be totally excluded from the Age Pension by the January 2017 Pension Asset Test changes.

January 2017 Pension Asset Test changes to Asset Test Allowances

The Asset Test Allowance is the value of assets that a pensioner could have before the Asset Test starts to reduce the Pension rate.

For a Single homeowner Pensioner, the Asset Test Allowance increases from $209,000 to $250,000 excluding the value of her home.  For a Single Pensioner who is not a homeowner, the Asset Test Allowance increases from $360,500 to $450,000.

Remember that at Centrelink, you cannot be assessed as a Single Pensioner if you have a domestic partner.

The Asset Test Allowance for a homeowner couple increases from $296,500 to $375,000 excluding the value of their home.  For a for a non-homeowner couple, the Asset Test Allowance increases from $448,000 to $575,000 on 1 January 2017.

At Centrelink a couple is any two adults who share domestic arrangements and present socially as a couple.  Read more about Personal Circumstances at Centrelink.

January 2017 Pension Asset Test changes to taper rate

The January 2017 Pension Asset Test changes to the taper rate mean that your Pension would be reduced by three dollars per fortnight for every one thousand dollars of assessable asset value over the Asset Test Allowance.

In 2016, the Asset Test reduces your Pension entitlement by $1.50 per fortnight for each $1,000 of assessable assets over the Asset Test Allowance.

Illustration of increased Age Pension after January 2017 Pension Asset Test changes

Consider Isobel, a single Age Pensioner who owns her home plus a car and personal things valued at $20,000.  Isobel also has financial assets of $230,000.  At Centrelink, Isobel is a single homeowner with assets of $250,000.

Isobel has no income apart from the interest on her financial assets.  The deemed income from her financial assets would be $259.50 per fortnight.  The Income Test reduces her Age Pension entitlement by fifty cents for every one dollar of income over $164. 00 per fortnight.  Therefore, Isobel could expect a reduction in her Age Pension of $47.75 per fortnight on account of the Income Test.

In October 2016, Isobel has an Asset Test Allowance of $209,000.

Under the 2106 Asset Test, Isobel has excess assets of $250,000 minus $209,000, that is, $41,000.  Her Age Pension is reduced in October 2016, by $1.50 for each $1,000 of excess assets.  Thus the impact of the 2016 Asset Test is to reduce Isobel’s Age Pension by $61.50 per fortnight.

The Asset Test reduction of $61.50 per fortnight would apply to Isobel’s Pension as this is a bigger reduction than under the Income Test.

After the January 2017 Pension Asset Test changes, Isobel would have nil excess assets.  Her assessable assets do not exceed the new Asset Test Allowance of $250,000.  After the January 2017 Pension Asset Test changes, Isobel’s Age Pension would not be impacted by the new Assets Test.

From January 2017, Isobel’s Age Pension would reduce by $47.75 per fortnight on account of the Income Test.

Overall, Isobel’s Age Pension entitlement would increase after the January 2017 Pension Asset Test changes.  But the Income Test would reduce Isobel’s Age Pension rather than the Asset Test.

 Illustration of reduced Age pension after January 2017 Pension Asset Test changes

Consider Mary, a single Age Pensioner who owns her home plus a car and personal things valued at $20,000.  Mary also has financial assets of $300,000.  At Centrelink, Mary is a single homeowner with assets of $320,000.

Mary has no income apart from the interest on her financial assets.  The deemed income from her financial assets would be $347.00 per fortnight.  The Income Test reduces her Age Pension entitlement by fifty cents for every one dollar of income over $164.00 per fortnight.  Therefore, Mary could expect a reduction in her Age Pension of $91.50 per fortnight on account of the Income Test.

In October 2016, Mary has an Asset Test Allowance of $209,000.

Under the 2106 Asset Test, Mary has excess assets of $320,000 minus $209,000, that is, $111,000.  Her Age Pension is reduced in October 2016, by $1.50 for each $1,000 of excess assets.  Thus the impact of the 2016 Asset Test is to reduce Mary’s Age Pension by $166.50 per fortnight.

The Asset Test reduction of $166.50 per fortnight would apply to Mary’s Pension in 2016, as this is a bigger reduction than under the Income Test.

After the January 2017 Pension Asset Test changes, Mary would have excess assets of $320,000 less $250,000, that is, $70,000.  After the January 2017 Pension Asset Test changes the taper rate will be $3.00 per fortnight for every $1,000 of excess assets.  Thus the impact of the 2017 Asset Test is to reduce Mary’s Age Pension by $210.00 per fortnight.

Overall, Mary’s Age Pension entitlement would be reduced after the January 2017 Pension Asset Test changes

Illustration of cancellation of Age pension after January 2017 Pension Asset Test changes

Consider Bob and Betty, an Age Pensioner couple who own a holiday house in addition to their home.  Centrelink value the holiday house at $600,000.  Bob and Betty are retired school teachers with superannuation pensions totaling $2,000 per fortnight.  Bob and Betty have personal and household things valued at $10,000 plus two motor vehicles worth $40,000 combined.  They also have financial assets of $150,000.

At Centrelink Bob and Betty are a homeowner couple with assets of $800,000.

Income Test for Bob and Betty

Bob and Betty have a deemed financial income of $140 per fortnight.  Their total income at Centrelink is $2,140 per fortnight.

The Income Test reduces their total joint Age Pension entitlement by fifty cents for every one dollar of their combined income over $292. 00 per fortnight.  Therefore, Bob and Betty could expect a reduction in their Age Pensions of $462.10 per fortnight each on account of the Income Test.

2016 Asset Test for Bob and Betty

In October 2016, Bob and Betty have an Asset Test Allowance of $296,500.

Under the 2106 Asset Test, Bob and Betty have excess assets of $800,000 minus $296,500, that is, $503,500.  Their total Age Pensions are reduced in October 2016, by $1.50 per fortnight for each $1,000 of excess assets.  Thus the impact of the 2016 Asset Test is to reduce Bob and Betty’s Age Pension by $377.60 per fortnight each.

The Income Test reduction of $462.10 per fortnight would apply to Bob and Betty’s Pensions as this is a bigger reduction than under the October 2016 Test.

January 2017 Asset Test for Bob and Betty

After the January 2017 Pension Asset Test changes, Bob and Betty would have excess assets of $800,000 less $375,000, that is, $425,000.  After the January 2017 Pension Asset Test changes the taper rate will be $3.00 per fortnight for every $1,000 of combined excess assets.

Thus the impact of the 2017 Asset Test is to reduce Bob and Betty’s Age Pension by $637.50 per fortnight each.  But the Age Pension for a member of a couple at Centrelink is $601.50 per fortnight following the September 2016 Pension increase.

Therefore Bob and Betty have no entitlement to the Age Pension once the January 2017 Pension Asset Test change applies.

Bob and Betty would have ongoing entitlements to Commonwealth Seniors Health Cards and Low Income Health Cards as ex-Pensioner. Read more below.

DSP and Age Pension cut off levels after January 2017 Pension Asset Test changes

Your DSP or Age Pension could stop in January 2017, if you are single and have assets of $515,650 in addition to your home.
A single non-homeowner could have $715,300 of assets and retain that last one dollar per fortnight of Pension, provided that the Income Test did not exclude her from the Pension.

A couple living together in their own home could have $775,300 of assets in addition to their home and not be excluded by the new Assets Test from that last one dollar per fortnight of Pension.
A non-homeowner couple could have$906,330 of assets before the new Asset Test cut off their Pensions.

Concession Cards for people whose Pensions are cancelled by the January 2017 Pension Asset Test changes

If your Pension is cancelled by the January 2017 Pension Asset Test changes then your Pensioner Concession Card will also be cancelled.

But if your Age Pension is cancelled because of the January 2017 Pension Asset Test changes, Centrelink intend to issue you with Low Income Health Care Card and a Commonwealth Seniors Health Card.  These Health Cards will not be subject to the usual income tests if you get them because your Age Pension was cancelled by the January 2017 Pension Asset Test changes.

The non-income tested Low Income Health Care Card will be issued to DSP recipients who have their Pensions cancelled by the January 2017 Pension Asset Test changes.

Low Income Health Cards attract bulk billing at most local doctors.  Pensioner rates for PBS medicines and some utility discounts are available to Low Income Health Card holders.

Why apply for a Pension before January 2017 Pension Asset Test changes

If you are in Australia and receiving just one dollar per fortnight of Age Pension at the end of 2016, then you could get a non-income tested Low Income Health Care Card and a non-income tested Commonwealth Seniors Health Card.

That means you could continue your eligibility for the Pensioner Concession rates for PBS items using a Commonwealth Seniors Health Card.  But you would not need to prove financial eligibility for the Commonwealth Seniors Health Card each year.

When your Pensioner Concession Card is cancelled because of the January 2017 Pension Asset Test changes you will receive a non-income tested Low Income Health Care Card.  Low Income Health Cards are normally only valid for six months.  Re-applying for the Low Income Health Card requires extensive proof of income.

But, if your DSP or Age Pension was cancelled by the new Asset Test then you would not need to keep proving your income to Centrelink.

The Centrelink issued Health Cards offer valuable concessions on health costs. 

Non income tested health cards will be issued to people whose Pensions were cancelled by the January 2017 Pension Asset Test changes.  Remember that you must be in Australia to use or retain a Centrelink issued Health Card.

Am I eligible to start an Age Pension before January 2016

You must have attained age 65 years to apply for an Age Pension.  You cannot start an Age Pension until you have lived in Australia as a permanent resident for at least ten years. The amount of Age Pension that you could receive is subject to an Income Test and an Asset Test.

Centrelink have detailed rules about the assets to be counted for the Asset Test.  For the Income Test, Centrelink calculate assessable income differently from the income that you see coming into your bank account.

Read more about the October 2016 asset and income limits for Pensions

Personal Help with Age Pension assessments.

Help is available. Christine at Financial Care Services is experienced with Centrelink Pension Applications and the many Centrelink financial means tests.

Financial Care Services offers Short Consultations for ‘personal financial factual information’ to help you check your financial position against the means test for an Age Pension or Commonwealth Seniors Health Card.

If you think that you might be eligible for an Age Pension in 2016 or a  Commonwealth Seniors Health Card you can contact Christine or call her on 03 9808 0338 to arrange a Short Consultation, 45 minutes in person or by telephone and/or email to discuss your potential for a Commonwealth Seniors Health Card. The fee for a Short Consultation for ‘personal financial factual information’ is $99. Please ask for a special ‘short personal financial factual information consultation’ when you book your appointment.

Clients who are unable to attend the Financial Care Services office in Camberwell are welcome to Contact us via email to arrange for a Short personal financial factual information Consultation.

You can start the Short ‘personal financial factual information’ Consultation by emailing for the Financial Care Services Financial Services Guide and the Financial Care Services Commonwealth Seniors Health Card / Age Pension Data form.

Christine could also assist you with collating your personal data, checking your income and asset values for a Pension and/or checking your assessable income against the Commonwealth Seniors Health Card Income Test limits, and completing the Centrelink forms for you to sign. Normal hourly rate consultation fees apply for assistance with personal data collation, completing Centrelink forms and attendance at a Centrelink office with you.

If you would like further confidential, independent and professional advice about Commonwealth means testing, Centrelink, lifestyle or financial issues please contact Christine Hopper.

Disclaimer.

These Insights are a general over view based on our understanding of the Social Security and DVA Pension arrangements. Individual entitlements to Social Security and DVA benefits are determined based on your actual situation as documented to Centrelink or DVA.
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