Treatment of Defined Benefit Pensions
1 January 2016
If you have a Federal or State Government Superannuation pension from CSS, PSS, DFRDB, ESS Super, VicSuper or Vision Super and you have a Centrelink benefit, these changes could affect you.
Previously, any deductible (tax free) portion of such pensions has been exempt for the purposes of the Centrelink Income Test. With effect from 1 January 2016, the Centrelink Income Test will cap this exempt amount at a maximum of 10% of the gross superannuation pension amount.
Bill has a superannuation pension gross payment of $500 per fortnight. His deductible (tax free) amount is $200 per fortnight which means that only $300 per fortnight is counted toward the Centrelink Income Test. After 1 January 2016, the deductible amount is reduced to $50 (10% of the superannuation pension amount). If Bill was currently income tested this change would result in a reduction of $ 75 per fortnight of Centrelink benefits.
Changes to the Asset Test Threshold
1 January 2017
The changes to the Asset Test Threshold are intended to reduce access to the age pension for wealthy seniors and to protect pensioners with lower levels of assets. The Government has kept its commitment however, to continue to exclude the family home from the assets test.
From 1 January 2017, the assets test threshold for those eligible to receive the full age pension will increase from $286,500 to $375,000 for couples ($202,000 to $250,000 for singles). This means more Australians will be eligible for the full age pension, however, the upper threshold for those eligible to receive a part age pension will decrease from $1,151,500 to $823,000 for couples ($775,500 to $547,000 for singles). Some retirees who were once able to receive a part age pension may no longer be eligible to receive the age pension from the Government.
In addition, the taper rate for the assets test, which determines how much age pension you receive, will be $3 a fortnight for every $1,000 of assets you own over the full age pension threshold.
On a positive note, those who lose their age pension will be guaranteed eligibility for the Commonwealth Seniors Health Card (CSHC).
If you believe you may be affected by either of these changes, we will be in contact with you as part of our ongoing review process. If you have any queries in the meantime, please contact us.