Retirees and those nearing retirement with large superannuation balances and other assets and investments will likely be affected by new pension asset test changes, which passed Parliament on 22 June, 2015.
Hayden Ross a Financial Adviser with Pacesetter Financial Services, and an authorised representative of Fortnum Financial Advisers, says that under the new legislation, wealthy couples who own their own home and have over $823,000 in assets (not including the family home) will see their pension entitlements reduced or cut entirely.
“This is because the upper pension asset threshold, which stipulates the maximum amount of assets that a retiree can hold before they lose access to a part pension, will drop from $1.15 million to $823,000.
“On the flipside, the lower pension asset threshold will increase, effectively lifting the amount of assets the average retiree can hold and still qualify for the full pension. However, the asset test taper rate will also increase from $1.50 per fortnight for every $1,000 above the threshold to $3 per fortnight,” he said.
Mr Ross says that for a retired couple who own their own home, they can currently claim the full age pension if their assets (not including the family home) are worth $286,000 or less.
Beyond that amount, their pension entitlements decrease by $1.50 per fortnight for every additional $1,000 above the threshold.
“From 2017, they’ll be able to hold up to $375,000 in assets and still qualify for the full pension. However, if they exceed the new threshold, their pension entitlements will decrease by $3 per fortnight for every additional $1,000. Changes to the taper rate will result in a reduced upper threshold,” he said.
There are also changes with regard to concession cards.
“Any retirees who are negatively affected by the new changes will automatically receive a Commonwealth Seniors Health Card or a Health Care Card without the need to satisfy the usual income requirements,” Mr Ross said.
“These cards provide access to cheaper prescription medicines, Australian government-funded medical services and other government concessions.”
Veterans, war widows and widowers and dependants who lose their service pension as a result of the changes will retain their Veterans’ Affairs Gold Card.
To be properly prepared for the changes, Mr Ross suggests retirees, and those who are considering retirement in the coming years to seek advice and develop a plan for managing any financial impacts that may affect their financial position.
To find out more contact Hayden Ross at Pacesetter Financial Services on 07 3808 2808 or email firstname.lastname@example.org
Hayden Ross is a financial adviser at Pacesetter Financial Services. Pacesetter Financial Services and its advisers are Authorised Representatives of Fortnum Private Wealth Pty Ltd ABN 54 139 889 535 AFSL 357306 trading as Fortnum Financial Advisers.
This information (including taxation) is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Pacesetter Financial Services strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.