Recent changes to the assets test for pensioners
From January 1, 2017, the assets test free area and taper rate for pensions increased.
The assets test works by reducing a person’s age pension payment for every dollar of assets owned over a certain value. The test takes into account most assets, including any property (except your primary home) or possessions owned, or partly owned, in or outside Australia.
The assets test is one of two means tests used by the Department of Human Services (Centrelink) to determine your age pension eligibility, the second being an income test. The results of these tests that produces the lowest pension payment (or zero) is then applied.
The asset test free area is the amount of assets you can have without affecting your pension. Centrelink will reduce your pension by $3 each fortnight for every $1,000 of assets you own over the assets test free area.
This is the taper rate. Before January 1, this rate was set at $1.50 (so it has therefore doubled).
Some people will have received more or have no change to their pension, but there is also the possibility that people may have their pensions reduced or cancelled. Centrelink states that if you lose your pension due to the January 1 changes, you will automatically get a non-income tested Low Income Health Care Card, and Commonwealth Seniors Health Card if you are age pension age. The former provides concessions on water rates and energy bills, among other discounts, and the latter provides discounts on prescription medicines and bulk-billed doctors’ appointments.
See tables below to compare the old and new limits – Please contact TNR with any queries
Table 1: Before and after assets test thresholds, or disqualifying limits, for the full age pension
| Category | Examples |
|---|---|
| Advice or services relating to the proposed structure or the proposed operation of the business | DEDUCTIBLE |
| ■ Legal or accounting advice on best business structure to set-up | |
| ■ Services in setting up such legal arrangements or business systems for such structures | |
| ■ Professional advice on the viability of a proposed business (eg feasibility of a location or due diligence of an existing business being purchased) |
|
| ■Cost associated with raising capital (whether debt or equity) for the operation of the proposed business – including crowd sourced equity funding |
|
| NON-DEDUCTIBLE | |
| ■ Costs in relation to an existing structure | |
| ■ The cost of acquiring assets that may be used by the business – when establishing a structure |
|
| ■ Direct costs of the capital such as interest, dividends or capital repayments – when raising capital |
|
| ■ Other expenses in relation to the proposed business (such as the cost of travelling to a particular location as part of assessing locations for a business). |
|
| Payment to an Australian government agency* of a fee, tax or charge incurred in relation to setting up the business or establishing its operating structure | DEDUCTIBLE |
| ■ Regulatory costs in setting up a business – such as ASIC fees for setting up a company |
|
| ■ Costs associated with transferring assets to the entity which is intended to carry on the proposed business, such as stamp duty |
|
| NON-DEDUCTIBLE | |
| ■ Expenditure relating to taxes of a general application such as income tax. |
Table 2: Thresholds for a part age pension
| Entertainment | Not entertainment |
|---|---|
| glasses of champagne | bottled spirits |
| hot meals | groceries |
| theatre tickets | games |
| holiday accommodation | TV sets, DVD players |
| hired entertainers | computers |
| hired sporting equipment | crockery |
| swimming pools | |
| gardening equipment |
