07 May A Crafty Bit Of Work By Robin Hood

A Crafty Bit Of Work By Robin Hood

Today the government has released new Assets Test Limits for Age Pensioners, which are to come into effect 1 January 2017 (assuming they pass the Senate). By the sounds coming out of the government today this appears to be a fait accompli as they expect the Greens to support the measures in the Senate (although with a change in the Greens leadership yesterday and the too-ings & fro-ings we have experienced in the Senate over the last 12 months nothing should be taken for granted). The Labor Party has been in the press this week saying that they wouldn’t support any change to Age Pensions.

Both sides of politics are now playing the “Robin Hood” game by taking from the perceived rich and giving to the poor, with the New Assets Test rules exemplifying this again. The government has increased the assets test exempt area allowing more people at the bottom of the totem pole to gain more in the way of benefits, whilst reducing the upper end.

By their own calculations the Government have determined that 91,000 pensioners will lose all Age Pension under the New Assets Test & a further 236,000 will have benefits reduced – either way 327,000 is a lot of votes to lose !!!. They have said that people losing the Age Pension will still get an Australian Seniors Health Card which allows them access to pharmaceutical items at PBS rates (assuming that they are not income tested out of this benefit as well) – however they will not get any other concessional benefits that Age Pensioners receive (reductions in some rates & taxes).

Currently we have 2 sets of Income & Assets Test in play – those for persons who commenced an Age Pension prior to 20/9/2009 (known as a “transitional” age pension) and those who commenced at any time after. It is not clear what levels of assets tests will apply for these calculation’s from 1/1/2017, or whether (for say homeowner couples) that the flat $823,000 maximum limit will apply for both.

Most people that I see are generally assessed under the Income Test, rather than the Assets Test, so the majority of Age Pensioners have nothing to fear. Those that are assessed under the Assets Test will likely see some benefits reduced or in some circumstances cut entirely. We will need to wait to see how this plays out. From a personal & fairness perspective I would consider that if a new Assets Test is introduced, then this should be only levied against new pensioners as from 1/1/2017, rather than all pensioners (which is in effect a retrospective move).

For those who have an Assets Test problem there is only 1 real solution – spend $$$$$. This can be on a holiday or other intangible benefit (money is then gone), or home improvements/home upgrade (as the family home is an exempt asset). Unless you are at danger of losing all of your benefits and are close to the limit, I wouldn’t be” jumping the gun at this stage”.

Under proposed Centrelink rules for every $10,000 of assets over the limit you reduce your combined Age Pension by $780 per annum. So if you spend $10,000 you only get $780 back !!! – I know what I would rather have.

So lets see how this plays out in the political spectrum over the next few weeks. I know that until the new rules are bedded down that I won’t be taking any actions for clients.

New Assets Test Limits As Released By The Government Today Are Detailed Below

ASSETS TEST FREE AREAS
* Single homeowner $250,000 (previously $202,000)
* Single non-homeowner $450,000 ($348,500)
* Couple homeowners $375,000 ($286,500)
* Couple non-homeowners $575,000 ($433,000)

ASSETS TEST CUT-OUT (Maximum Limits)
* Single homeowner $547,000 ($775,000)
* Single non-homeowner $747,000 ($922,000)
* Couple homeowners $823,000 ($1.15 million)
* Couple non-homeowners $1.023 million ($1.298 million).

TAPER RATE (by how much the pension is reduced)
* Increases from $1.50 to $3 per $1000 of assets over the test-free threshold.