2015 Federal Budget update

Federal Budget

Find out how this year's Budget could impact your retirement.

The Australian Government has made no changes to superannuation tax or the preservation age in this year’s Federal Budget but has announced plans to change Age Pension eligibility and criteria for early access to superannuation due to a terminal medical illness. In particular, the proposed changes to the pension system could impact some Australians’ retirement income.

It’s important to remember, though, any initiatives proposed in the Budget must pass through Parliament before they can take effect.

You can learn more about the proposed changes to the Age Pension and superannuation by clicking on any of the blue sections below. All measures – unless stated otherwise – will take effect from 1 January 2017 (provided they pass through Parliament).

Increase to asset-free threshold for Age Pension eligibility

The ‘asset-free area’ for Age Pension eligibility is the amount of assets you can hold in addition to your family home to qualify for a full pension. Under changes proposed in this year’s Budget, the asset-free area will increase from $202,000 to $250,000 for single home owners and from $286,500 to $375,000 for couples who own their own home.

The Australian Government estimates around 172,000 pensioners will see an average increase of $30 in their fortnightly pension payment.

Increase to asset taper rates for pensions

The assets test taper rate will increase from $1.50 to $3.00. This means for every $1,000 of assets you hold over the asset free threshold, your fortnightly pension payment will reduce by $3.00.

This sees the taper rate return to the same level it was before the Howard-Costello Government relaxed the rate from $3.00 to $1.50 in the 2006 Federal Budget.

Reduction in maximum assets threshold for part pensions

For single homeowners, the maximum value of assets you can hold while still being eligible for the part pension will drop from $775,000 to $547,000.

For couples who own their own homes, this threshold will drop from $1.15 million to $823,000.

The family home will remain excluded from the assets test.

For pensioners who don’t own their own homes, their maximum threshold will be $200,000 more than home owner pensioners. This represents an increase of over 30% in the gap between home owners and non-homeowners’ maximum assets thresholds. The Government says this increase is to recognise the higher living costs faced by non-homeowners.

As a result of these changes it’s estimated around 91,000 pensioners who currently claim the part pension will no longer qualify at all while around 235,000 part pensioners will see their pension reduced.

If you lose your age pension you will still be able to hold a Commonwealth Seniors Health Card (CSHC) or Health Care Card, which provides the same concessions for pharmaceuticals that pensioners receive.

Scrapping of 2014/15 Budget measures for age pension eligibility and deeming thresholds

The proposed changes to Age Pension eligibility in this year’s Budget replace the initiative announced in last year’s Budget to index the pension to inflation rather than wages. If implemented, this would have meant pension payments increased at a slower rate.

This year’s Budget also scraps last year’s Budget measure to freeze pension income eligibility thresholds for 3 years.

Instead, pension income test free areas and deeming thresholds will continue to be indexed twice yearly to the highest indexation rate.

Tightening age pension access for Australians living overseas

Under the current Australian Working Life Residence (AWLR) scheme, pensioners who go overseas will have their full pension paid to them for the first 26 weeks if they have lived and worked in Australia for at least 35 years between the age of 16 and 65. After 26 weeks, their pension is reviewed and any downward adjustments are made if they have lived in Australia for less than 35 years.

Under the proposed changes in this year’s Budget, overseas pensioners would see this review period kick in after 6 weeks rather than 26 weeks so those affected could see a reduction in their pension income.

Easing criteria for early release of super for a terminal medical illness

Currently, a person needs two medical practitioners to certify they are likely to die from a terminal medical condition within 1 year in order to gain early access to their super. This year’s Budget has increased the certification period to 2 years from 1 July 2015, allowing terminally ill patients earlier access to their super.

Want to know more?

This year’s Budget saw many initiatives announced that were unrelated to superannuation or pensions, but could still impact your financial situation (such as changes to paid parental leave, childcare, healthcare and unemployment benefits).

Talk to LGsuper

Our qualified and friendly Member Services team can help you make sense of the superannuation and Age Pension changes in this year’s Budget and explore strategies for achieving a better financial future. Contact us to have your questions answered.

First published:

May
13

Last updated:

Jan
29

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