Turnbull – Abbott – 300,000 Age Pensioners to face Age Pension entitlements cut

More than 300,000 Age Pensioners will have their Age Pension entitlements cut, with just under 100,000 of those affected Australians losing all Age Pension entitlements, taking immediate effect from 1 January 2017. And due to some miscalculations by the federal government, it looks like many thousands more will be affected by the January 2017 changes.

We were told by the federal government, that, as a couple, if you currently receive the Age Pension, and you own more than $823,000 in assets including super and all other assets (but excluding your home), then you will no longer receive the Age Pension from 1 January 2017. For those Age Pensioner home-owning couples who own less than $823,000 in assets, but more than $450,000 in assets, then you were warned to also expect your Age Pension entitlements to be hit. All of this continues to be the case, but the harsher Age Pension assets test for a couple actually cuts out at a lower amount – $816,000!

Oops! The federal government had based the earlier information on projected Age Pension rates as at 1 January 2017, and Age Pension rates are actually lower than anticipated. What this boo boo means is that the cut-off point for a PART Age Pension is even lower than $823,000 for a couple. According to Centrelink (DHS), the cut-off point will be $816,000 for a home-owning couple. I anticipate that many more thousands of Australians than predicted will be getting a shock from January 2017. Currently a home-owning couple can have up to $1,178,500 in assets before they lose the Age Pension. You can find more details on the specifics, including tables, later in the article.

Likewise, we were told by the federal government, that as a single person, if you currently receive the Age Pension, and you own more than $547,000 in assets including super and all other assets (but excluding your home), then you will lose your Age Pension entitlements from 1 January 2017. For those Age Pensioner home-owning single people who own less than $547,000 in assets but more than $250,000 in assets, then you were warned to expect your Age Pension entitlements to also be hit.  All of this continues to be the case, but the harsher Age Pension assets test for a single person actually cuts out at a lower amount – $542,500!

Another oops! The federal government had again based this information on projected Age Pension rates as at 1 January 2017, and Age Pension rates are actually lower than anticipated. What this boo boo means is that the cut-off point for a PART Age Pension for a single person is even lower than $547,000. According to Centrelink (DHS), from 1 January 2017, the cut-off point will be $542,500 for a home-owning single person. Currently a home-owning single person can have up to $793,750 in assets before they lose the Age Pension. You can find more details on the specifics, including tables, later in the article.

Note: Higher assets test thresholds apply for Age Pensioners who don’t own their own home (for more information, see table below and tables at the end of the article).

Important: On a positive note, the assets test thresholds for claiming the FULL Age Pension are increasing from 1 January 2016, which means an estimated 50,000 extra Australians will be eligible for the FULL Age Pension. On the downside, the harsher Age Pension assets test for PART Age Pension means an estimated 300,000 Australians will lose Age Pension entitlements, with 100,000 of those retirees losing all entitlements.  Now that we know the PART Age Pension thresholds are lower than first announced, we expect these estimates to be conservative.

Warning: The harsher assets test also applies to other social security pensions, including disability support pension, wife pension, carer payment, bereavement allowance, widow B pension and certain pensions administered by the Department of Veterans’ Affairs. According to the revised Explanatory Memorandum accompanying the legislation, the assets test also applies to parenting payment and allowances (widow allowance, youth allowance, austudy payment, newstart allowance, sickness allowance, special benefit and partner allowance).

What are the Age Pension assets test thresholds from January 2017?

In the tables below, we outline the FULL Age Pension thresholds (Table A), and also in Table B, we outline what the current Age Pension assets test thresholds are (from 20 September 2016 until 31 December 2016), and what the federal government said the UPPER asset thresholds (for PART Age Pension eligibility) would be as at 1 January 2017, and what they are actually going to be as at 1 January 2017.

Table A: Age Pension LOWER assets test thresholds (for FULL Age Pension) – Age Pension assets-test free area

	Homeowner		Non-homeowner
	Until December 2016*	January 2017	Until December 2016*	January 2017
Single	$209,000	$250,000	$360,500	$450,000
Couple	$296,500	$375,000	$448,000	$575,000

*Current asset-free areas (for FULL Age Pension entitlement) were indexed on 1 July 2016 and apply until 31 December 2016.

Table B: Age Pension UPPER assets test thresholds (for PART Age Pension)

	Home owner			Non-homeowner
	Until 31 December 2016	Announced for 1 January 2017	ACTUAL for 1 January 2017	Until 31 December 2016	Announced for 1 January 2017	ACTUAL for 1 January 2017
Single	$793,750	$547,000	$542,500	$945,250	$747,000	$742,500
Couple	$1,178,500	$823,000	$816,000	$1,330,000	$1,023,000	$1,016,000

In anyone’s language this is a retrospective change to the Age Pension rules and hits retirees receiving a part Age Pension. In most cases, these retirees are not in position to return to work to replace the income they will lose from 1 January 2017, and the Coalition government, with the support of the Greens, have essentially devastated the retirement plans of several hundred thousand Australian retirees. Although the ALP’s position is not much better, with Opposition leader Bill Shorten publicly stating that the ALP will not reverse the changes with the help of the independents, even though the ALP opposed the passage of the legislation when it became law.