Changes to the pension assets test 2017
Changes to the pension assets test that take place from 1 January 2017 will benefit some people receiving government pensions, as well as giving some Australians access to a pension not previously available.
The Federal Department of Human Resources has an assets test free area when deciding on Aged Pension entitlements, above which allowances are not paid and pensions are reduced.
Having a funeral plan, or increasing the money held in a funeral plan, is a way to reduce assessable assets, and so further increasing a government pension. A key benefit of funeral bonds is they are exempt, up to a $12,500 threshold, from testing under the Assets and Income Test. And no contribution limit applies to a pre-paid funeral plan, so you can invest as much as you like to cover you future funeral expenses without negatively impacting your pension.
The Government has announced that in 2017 the assets test free areas will increase to:
- $250,000 for a single homeowner
- $375,000 for a homeowner couple
- $450,000 for a single non-homeowner
- $575,000 for a non-homeowner couple
For assets held above the new assets test free areas, pensioners will be subject to a new ‘taper rate’ of $3 for every $1,000 of assets owned above the figures shown above.
As an example of what this means, an extra $10,000 in assets over the test free area will reduce the aged pension entitlement by $30 per fortnight.
What’s more, if you are close to the test free threshold, contributing to a funeral plan may be the difference that gives entitlement to a pension and the associated benefits that were not previously available to you.
Now is a great time to discuss investing in a funeral bond, or increasing your investment and reducing assessable assets to keep more money in your pocket.