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What do the Age Pension asset test changes mean for Australian retirees?

  • kofkinbond
  • September 2, 2016

An extra 50,000 Australians will receive the FULL Age Pension from 1 January 2017, and at least 326,000 Australians will lose some or all Age Pension entitlements from 1 January 2017.

Currently, for a FULL Age Pension, a single person can own no more than $205,500 in assets (excluding his or her home), while a couple can own no more than $291,500 in assets (excluding home). These thresholds for a FULL Age Pension will be indexed again from 1 July 2016, while the PART Age Pension thresholds are indexed three times a year, in line with the FULL threshold indexation, and the Age Pension rate increases (in March and September of each year).

From January 2017, by increasing the assets-test free threshold to $250,000 (single home-owner) and $375,000 (couple home-owners), more retired Australians will be entitled to the FULL Age Pension. The federal government estimates 50,000 more Australians will receive a FULL Age Pension as a result of these changes, and another 120,000 Australians will receive a slight increase in PART Age Pension entitlements.

Currently, a single person can own $788,500 in assets (excluding his or her home), before losing a PART Age Pension entitlement, while a couple can own $1.17 million in assets (excluding the couple’s home) before losing a PART Age Pension entitlement. Tables outlining the current assets test thresholds are set out in other articles (refer earlier links), and also listed at the end of this article.

From January 2017, by increasing the taper rate to $3 for every $1000 of assets, those Australians currently receiving a PART Age Pension and holding more than $823,000 in assets (excluding the family home) will lose all PART Age pension entitlements.

For guidance on how the stricter tapering rate for the Age Pension assets test will affect single or couple Age Pensioners, and Age Pensioners who own their home, and those that do not, see the 4 tables set out below:

Table 1: Age Pension assets test changes: Home-owner couples

The table below:

  • compares the amount of Age Pension received by a homeowner couple under the measure to “Rebalance the Assets Test Parameters” with the amount they would receive under the present assets test arrangements;
  • shows the percentage of their assets that they would need to draw down to replace the reduction in their pension as a result of the Rebalance the Assets Test Parameters measure; and
  • shows the number of pensioners with assessable assets in the ranges that are affected by “Rebalance the Assets Parameter” measure.
Assessable Assets Age Pension received at current $1.50 taper rate* Age Pension under rebalanced asset test measure* Reduction (increase) in pension income received % of assets required to replace Age Pension Assessable asset range Number of pensioners with assessable assets in specified range
$100,000 $34,923 $34,923 $0 N/A $0 – $99,999 523,361
$200,000 $34,923 $34,923 $0 N/A $100,000 – $199,999 291,978
$300,000 $34,865 $34,923 ($59) N/A $200,000 – $299,999 197,580
$400,000 $30,965 $32,973 ($2,009) N/A $300,000 – $399,999 116,281
$451,500 $28,956 $28,956 $0 N/A $400,000 – $499,999 81,637
$500,000 $27,065 $25,173 $1,892 0.38%
$600,000 $23,165 $17,373 $5,792 0.97% $500,000 – $599,999 59,992
$700,000 $19,265 $9,573 $9,692 1.38% $600,000 – $699,999 46,640
$800,000 $15,365 $1,773 $13,592 1.70% $700,000 – $799,999 36,528
$823,000 $14,467 $0 $14,467 1.76%
$900,000 $11,465 $0 $11,465 1.27% $800,000 – $899,999 28,358
$1,000,000 $7,565 $0 $7,565 0.76% $900,000 – $999,999 21,865
$1,100,000 $3,665 $0 $3,665 0.33% $1,000,000 – $1,099,999 13,401
$1,200,000 $0 $0 $0 N/A $1,100,000 AND GREATER 2,830

*based on projected pension rates at 1 January 2017.

Source: Commonwealth of Australia

Table 2: Age Pension assets test changes: Single home-owner

The table below:

  • compares the amount of Age Pension received by a single homeowner under the measure to “Rebalance the Assets Test Parameters” with the amount they would receive under the present assets test arrangements;
  • shows the percentage of their assets that they would need to draw down to replace the reduction in their pension as a result of the Rebalance the Assets Test Parameters measure; and
  • shows the number of pensioners with assessable assets in the ranges that are affected by “Rebalance the Assets Parameter” measure.
Assessable Assets Age Pension received at current $1.50 taper rate* Age Pension under rebalanced asset test measure * Reduction (increase) in pension income received % of assets required to replace Age Pension a year Assessable asset range Number of pensioners with assessable assets in specified range
$100,000 $23,166 $23,166 $0 N/A $0 – $99,999 457,298
$200,000 $23,166 $23,166 $0 N/A $100,000 -$199,999 142,763
$250,000 $21,626 $23,166 ($1,540) N/A $200,000 – $299,999 64,588
$289,500 $20,085 $20,085 $0 N/A
$300,000 $19,676 $19,266 $410 0.14% $300,000 – $399,999 36,732
$400,000 $15,776 $11,466 $4,310 1.08% $400,000 – $499,999 23,517
$500,000 $11,876 $3,666 $8,210 1.64% $500,000 – $599,999 15,463
$547,000 $10,042 $0 $10,042 1.84%
$600,000 $7,976 $0 $7,976 1.33% $600,000 – $699,999 9,731
$700,000 $4,076 $0 $4,076 0.58% $700,000 – $799,999 3,403
$800,000 $176 $0 $176 N/A $800,000 – $899,999 3

*based on projected pension rates at 1 January 2017

Source: Commonwealth of Australia

Table 3: Age Pension assets test changes: Non-home-owner couple

The table below:

  • compares the amount of Age Pension received by a non-home owner couple under the measure to “Rebalance the Assets Test Parameters” with the amount they would receive under the present assets test arrangements;
  • shows the percentage of their assets that they would need to draw down to replace the reduction in their pension as a result of the Rebalance the Assets Test Parameters measure; and
  • shows the number of pensioners with assessable assets in the ranges that are affected by “Rebalance the Assets Parameter” measure.
Assessable Assets Age Pension received at current $1.50 taper rate* Age Pension under rebalanced asset test measure * Reduction (increase) in pension income received % of assets required to replace Age Pension a year Assessable asset range Number of pensioners with assessable assets in specified range
$100,000 $34,923 $34,923 $0 N/A $0 – $99,999 271,935
$200,000 $34,923 $34,923 $0 N/A $100,000 – $199,999 30,453
$300,000 $34,923 $34,923 $0 N/A $200,000 – $299,999 13,909
$400,000 $34,923 $34,923 $0 N/A $300,000 – $399,999 7,378
$500,000 $33,012 $34,923 ($1,911) N/A $400,000 – $499,999 3,865
$600,000 $29,112 $32,973 ($3,861) N/A $500,000 – $599,999 2,271
$699,000 $25,251 $25,251 $0 N/A $600,000 – $699,999 1,307
$700,000 $25,212 $25,173 $39 0.01%
$800,000 $21,312 $17,373 $3,939 0.49% $700,000 – $799,999 961
$900,000 $17,412 $9,573 $7,839 0.87% $800,000 – $899,999 699
$1,000,000 $13,512 $1,773 $11,739 1.17% $900,000 – $999,999 531
$1,023,000 $12,615 $0 $12,615 1.23% $1,000,000 – $1,099,999 302
$1,100,000 $9,612 $0 $9,612 0.87%
$1,200,000 $5,712 $0 $5,712 0.48% $1,100,000 – $1,199,999 224
$1,300,000 $0 $0 $0 N/A $1,200,000 AND GREATER 102

*based on projected pension rates at 1 January 2017.

Source: Commonwealth of Australia

Table 4: Age Pension assets test changes: Single non-home owner

The table below:

  • compares the amount of Age Pension received by a single non-home owner under the measure to “Rebalance the Assets Test Parameters” with the amount they would receive under the present assets test arrangements;
  • shows the percentage of their assets that they would need to draw down to replace the reduction in their pension as a result of the Rebalance the Assets Test Parameters measure; and
  • shows the number of pensioners with assessable assets in the ranges that are affected by “Rebalance the Assets Parameter” measure.
Assessable Assets Age Pension received at current $1.50 taper rate* Age Pension under rebalanced asset test measure * Reduction (increase) in pension income received % of assets required to replace Age Pension a year Assessable asset range Number of pensioners with assessable assets in specified range
$100,000 $23,166 $23,166 $0 N/A $0 – $99,999 900,730
$200,000 $23,166 $23,166 $0 N/A $100,000 – $199,999 57,964
$300,000 $23,166 $23,166 $0 N/A $200,000 – $299,999 24,615
$400,000 $21,723 $23,166 ($1,443) N/A $300,000 – $399,999 12,668
$500,000 $17,823 $19,266 ($1,443) N/A $400,000 – $499,999 6,383
$537,000 $16,380 $16,380 $0 N/A $500,000 – $599,999 3,731
$600,000 $13,923 $11,466 $2,457 0.41%
$700,000 $10,023 $3,666 $6,357 0.91% $600,000 – $699,999 2,174
$747,000 $8,190 $0 $8,190 1.1% $700,000 – $799,999 1,292
$800,000 $6,123 $0 $6,123 0.77%
$900,000 $2,223 $0 $2,223 0.25% $800,000 – $899,999 666
$1,000,000 $0 $0 $0 N/A $900,000 – $999,999 67

* based on projected pension rates at 1 January 2017.

Source: Commonwealth of Australia

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