Tax and the Pension
The government will increase the asset test thresholds at which pensions are reduced once the threshold is exceeded, as follows: for single home owners – from $202,000 to $250,000, and for couple home owners – from $286,000 to $375,000.
Pensioners who do not own their own home will also see an increase in their threshold to $200,000 more than homeowner pensioners: for single non-home owners: $450,000, and for couple non-home owners: $575,000
The Government will also reduce the maximum value of assets that can be held to qualify for a part pension.
For couples, this is currently up to $1,151,500 plus the family home. Under the proposed changes, this threshold will decrease to $823,000 plus the family home.
Pensioners who lose pension entitlement on 1 January 2017 as a result of these changes will automatically be issued with a Commonwealth Seniors Health Card or a Health Care Card for those under Age Pension age.
The proposal will reverse changes to the ‘taper rates’ introduced in 2007. From 1993 to 2007 a $3 taper rate was in place where for every additional $1,000 in assets above the minimum threshold for a full pension, fortnightly payments were reduced by $3. In 2007, this was changed to a $1.50 taper rate.
Taxpayers impacted by these changes will be able to maintain their current level of income by drawing down less than 1.84% on their additional assets ($574,000 for a single homeowner), in a worst case scenario.
These measures will apply from 1 January 2017.
Some Elements of the Measure to Maintain Eligibility Thresholds for Australian Government Payments for three years not proceeding
The Government will not proceed with elements of the 2014‑15 Budget that relate to the pension income test free areas and deeming thresholds.
The pension income test free areas and deeming thresholds will continue to be indexed annually by the Consumer Price Index. Major pension related payments include the Age Pension, Carer Payment, Disability Support Pension, and the Veterans' Service Pension.
Pension Indexation to CPI will not proceed
The 2014-15 Budget measure to constrain increases in the pension to the Consumer Price Index will not proceed.
Pension and pension equivalent payment rates will continue to be indexed under current arrangements — by the higher of the increase in the CPI or the Pensioner and Beneficiary Living Cost Index and benchmarked against Male Total Average Weekly Earnings.