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Get ready for the new Age Pension rules

The Age Pension assets test is about to change on 1 January 2017 — so how will your social security entitlements be affected? 


The Federal Government has announced changes to the Age Pension assets test, which will take effect on 1 January 2017. This means your pension entitlements could either go up or down as a result.

The reason for the changes is to create a fairer balance between the assets you have and the social security benefits you’re entitled to. But if the Age Pension is your main source of retirement income, any change to the amount you receive could have a major impact on your retirement lifestyle. That’s why it’s important to plan ahead, so you’ll be ready for the changes when they happen.


What’s changing?

The assets test uses an upper and lower threshold to work out whether you’re eligible to receive a full Age Pension, a part Age Pension, or none at all. Different thresholds are used, depending on whether you’re a single person or a couple, and whether or not you own your own home. On 1 January 2017, each of the thresholds will either go up or down.


Here’s how the thresholds work, if the total value of your assets is:

  • less than the lower threshold amount, you may be eligible for the full Age Pension
  • between the lower threshold and upper threshold, you may be eligible for a part Age Pension
  • above the upper threshold amount, you’re not eligible for the Age Pension.


As a result of these changes, some people currently receiving a part Age Pension will lose their entitlement from 1 January 2017. If this happens to you, the government will automatically issue you with both a Health Care Card and the Commonwealth Seniors Health Card if you’re over the pension age.


Changes to the assets test thresholds

Here’s how the upper and lower thresholds will change on 1 January 2017.

  Lower threshold Upper threshold
Now From 1 January 2017 Now From 1 January 2017
$209,000 $250,000 $793,750 $542,500
$360,500 $450,000
$945,250 $742,500
$296,500 $375,000 $1,178,500 $816,000
$448,000 $575,000 $1,330,000 $1,016,000

Source: Australian Government Department of Human Services


How you can reduce your assessable assets

If the threshold changes are likely to have a negative impact on your retirement income, it’s a good idea to start planning now so you’re ready when 1 January rolls around. That may mean looking at ways to lower the value of your assessable assets. Here are some options:


  1. Increase the value of your home. As your home isn’t included in your assessable assets, it may be worth investing in renovations to raise the value — which you’ll get back if you eventually sell the property for a higher price.
  2. Gift money to your children or grandchildren. You’re allowed to make financial gifts of up to $10,000 per year, or a maximum of $30,000 over five years. This amount won’t count towards your assessable assets — but if you go over the cap, the excess will be assessed as a ‘deprived asset.’
  3. Buy a lifetime annuity. Lifetime annuities can provide advantages under the income and assets test as they are classified as long term income streams that are not subject to deeming and have a reducing asset value. Depending on the annuity, Centrelink may reduce its assessable value by a deduction amount every six months. At the same time, there is a benefit of a regular income from the annuity into older age.
  4. Prepay your funeral expenses. If you pre-purchase a burial plot, pre-pay your funeral expenses or purchase a funeral bond of up to $12,5001, the amount you spend will reduce the value of your assessable assets.


Get help from an expert

When you're relying on the Age Pension to fund your retirement, every dollar you lose from your entitlement could have a big impact on your standard of living. But it can also be difficult to know exactly how the changes will affect you, and whether you’re making the best possible financial decisions.


That’s why it’s worth speaking to a financial adviser. By talking through your options and making any adjustments to your financial strategy before the changes happen, your adviser will help ensure you can still meet your retirement goals. 

Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of super, pension and investment products. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A PDS for Colonial First State’s products are available at or by calling us on 13 13 36.