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Rebalanced assets test to apply from 01 January 2017

In the 2015 Budget, the Australian Government announced that it would be rebalancing the assets test limits to improve the fairness and affordability of the pension system. These changes have been passed by Parliament and will commence from 1 January 2017.

More than 90 percent of pensioners will either be better off or have no change to their pension under the rebalanced assets test. There will be no change to the existing assets test exemption for the family home.

Assessable assets include things like bank accounts, shares, investment properties and cars.

The assets test affects service pension and income support supplement, as well as pensions paid under the social security law such as age pension. Compensation payments such as disability pension and war widow(er) pension are not affected.

The rebalanced assets test will feature higher assets value limits, allowing pensioners to own a higher value of assets before their pension starts to reduce. Importantly, the increased assets value limits will continue to be indexed each 1 July.

The changes mean that people may receive either an increased rate of income support pension, a reduced rate, or have no change, depending on individual circumstances.

The figures in Table 1 represent the asset levels at which existing pensioners will experience a reduction in their rate of service pension or income support supplement under the new 1 January 2017 rules compared to their rate of service pension or income support supplement under the pre‑1 January 2017 rules.

TABLE 1 – asset values that may cause a pension reduction from 1 January 2017.

SERVICE / AGE PENSION ASSETS
Single homeowner $291,000
Single non homeowner $539,500
Couple combined, homeowner $453,500
Couple combined, non-homeowner $702,000
INCOME SUPPORT SUPPLEMENT  
Single homeowner $450,000
Single non homeowner $650,000
Couple combined, homeowner $633,500
Couple combined, non-homeowner $833,500

The diagram below illustrates this using the example of a single homeowner receiving service pension payments who has assets totalling $300,000.

Under the pre-1 January 2017 rules, this client would be receiving a reduced rate of service pension compared to the maximum rate available as their assets exceed the assets value limit of $209,000 (for single homeowners). Under the 1 January 2017 rules, they will also exceed the increased assets value limit of $250,000 (for single homeowners), therefore they will receive a reduced rate of service pension.

The asset level at which this client will experience a reduction in their rate of service pension under the 1 January 2017 rules compared to their rate of service pension under the pre-1 January 2017 rules is $291,000, which is represented where the blue and black lines intersect (this is the figure stated in Table 1 for single homeowners receiving service pension).  

As the 1 January 2017 rules result in a steeper taper rate, this client will experience a reduction in their rate of service pension as they transition from the pre-1 January 2017 rules (black line) to the 1 January 2017 rules (blue line) with a total assets value of $300,000.

Asset test diagram

The asset taper rate will be doubled, meaning that once an individual holds assets in excess of the limit, their pension will reduce at a higher rate. As a result, the level of assets at which pension is reduced to zero will be lower. Table 2 shows the assets values at which pension is reduced to zero under current rules and under the future rules.

TABLE 2 – assets at which pensions will reduce to zero from 1 January 2017.
  CURRENT RULES AS AT 20/9/2016 NEW RULES AS AT 1/1/2017
Single service/age pensioner, homeowner $793,750 $542,500
Single service/age pensioner, non homeowner $945,250 $742,500
Service/age pensioner couple combined, homeowner $1,178,500 $816,000
Service/age pensioner couple combined, non-homeowner $1,330,000 $1,016,000
Single income support supplement, homeowner $784,500 $537,750
Single income support supplement, non-homeowner $936,000 $737,750
Income support supplement couple combined, homeowner $1,164,000 $809,000
Income support supplement couple combined, non-homeowner $1,315,500 $1,009,000

 

You can estimate your 1 January 2017 pension rate using the Rebalanced Assets Test Ready Reckoners (DOCX 123 KB).

If your assets exceed the cut-off on 1 January 2017 resulting in your payment ceasing and you are over pension age, a Commonwealth Seniors Health Card will be issued to you without the need to meet the usual income test requirements for the card. If you are not yet pension age, you will be issued with a Commonwealth Seniors Health Card when you reach pension age.

If your assets exceed the cut-off on 1 January 2017, resulting in your payment ceasing, you can also claim a Health Care Card from the Department of Human Services. You won't have to meet the income test requirements for this card.

Veterans or war widows who currently hold a Veterans’ Affairs Gold Card will not lose their Gold Card as a result of their service pension or income support supplement ceasing due to the asset test changes.

The current asset value limits and taper rate will continue to apply until 1 January 2017. For more information on the changes visit the DVA website and the DSS website or call DVA on 133 254 or from regional Australia free call 1800 555 254.

What happens next
Your situation What will happen
You currently get the maximum rate of pension Your payment won’t change.
The changes increase your pension on 1 January 2017 This will happen automatically. You don’t need to contact us.
You get your pension from us and the changes reduce your pension on 1 January 2017 by more than $1 We’ll send you a letter. You don’t need to contact us.
You’re in Australia and the pension you get from us is cancelled on 1 January 2017

We’ll send you a letter. You don’t need to contact us.

You can claim a non-income tested Health Care Card from the Department of Human Services if you need one.

If you are over pension age, or you reach pension age DVA will automatically send you a non-income tested Commonwealth Seniors Health Card.

You won't have to meet the income test requirements for these cards.

You’re overseas and the pension you get from us is cancelled on 1 January 2017

We’ll send you a letter. You don’t need to contact us.

When you return to Australia, you can claim a non-income tested Health Care Card from the Department of Human Services if you need one.

If you’re over pension age and you return to Australia, you can also advise DVA and request us to issue you with a non-income tested Commonwealth Seniors Health Card.

You won't have to meet the income test requirements for these cards.

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