Important changes to the social security asset test effective 1 January 2017 have passed through parliament. The Government has called the changes ‘rebalancing the asset test’ as they aim to increase entitlement for those with lower levels of assets and reduce entitlement for those with higher levels of assets.
For those who will see a reduction or cancellation of the age pension, it’s important to review their retirement plans to ensure they have sufficient funds to meet retirement income needs.
Overview of the changes
The following changes to the assets test will apply from 1 January 2017:
- increase in the ‘asset free areas’ for both homeowners and non-homeowners.
- increase in the assets test taper for the pension assets test from $1.50pf to $3pf per $1,000 of assets over the asset free area. This results in a significant reduction in the upper assets test threshold.
According to the Government the proposed changes will result in:
- 91,000 losing entitlement to the pension
- 235,000 receiving a pension reduction
- 170,000 receiving a pension increase.
For those who lose entitlement to the pension on 1 January 2017 as a result of the assets test changes, they will be automatically issued with a Commonwealth Seniors Health Card or Health Care Card.