What Are The Changes To The Australian Aged Pension in 2017?

What Are The Changes To The Australian Aged Pension in 2017?

Retirement is often seen as a time to relax and enjoy the fruits of your hard work over many years past; a time to reconnect and spend time with friends and family. When preparing for this milestone, one important consideration which can be difficult for many of us, is navigating the ins and outs of the aged pension and maximising any money you have put away in your superannuation to give you a nice retirement.

While we’ve already had a runthrough on the aged pension here, many changes are happening in 2017 which can make the process of applying for it and preparing for your retirement seem more complicated than it already is.

To help clarify these muddy waters and help you through it all, here’s our guide to the changes we’ll see in the Australian pension & superannuation system so you can prepare for this special life event and spend more time enjoying it, stress-free.

 

Changes to The Australian Age Pension in 2017

To be eligible for the pension in 2017, you must be an Australian resident, physically residing in Australia. However, the age requirement will be increasing on the 1st of July 2017, to 65 and 6 months of age. The retirement age is due to increase by 6 months every 2 years, becoming 67 by 2023. 

On top of this basic criteria, individuals are also required to undertake an income test and an asset test. Both tests take into account whether you are currently a single person or part of a couple, with higher limits for couples in general.

 

Have the means tests changed?

While the income test has stayed the same, the asset test has changed significantly in the new year. It is important to remember that certain assets are excluded from the test however, such as the family home or primary residence, and funeral planning (up to $12,500).

However, for every $1,000 by which you exceed the asset threshold for the full pension, your payment will be reduced by $3.00 instead of $1.50. This is known as the taper rate. 

The thresholds themselves have also increased across the board for both couples and single people, as shown in the table below.

 

Assets test threshold for the full Age Pension

2016

2017

Single homeowners

$209 000

$250 000

Single non-homeowners

$360 500

$450 000

Couple homeowners

$296 500

$375 000

Couple non-homeowners

$448 000

$575 000

As a result of the higher thresholds and the increased taper rate of $3.00, the amount of assets you can have before losing your aged pension completely has decreased significantly for all groups.

 

Asset test threshold for the part Age Pension

2016

2017

Single homeowners

$793 750

$542 500

Single non-homeowners

$945 250

$742 500

Couple homeowners

$1 178 500

$816 000

Couple non-homeowners

$1 330 000

$1 016 000

As a result, anyone at the upper qualifying limit of the current aged pension will be affected by these adjustments. Anyone who will no longer be receiving a pension next year due to the changes will be issued a low income health care card and a Commonwealth Citizen’s Health Card. Both of these cards are exempt from the usual qualifying income tests if issued under these circumstances, and assist in reducing the costs of medication and other healthcare services.

 

Superannuation changes in 2017

When thinking about your retirement, another consideration which needs to be made is how you will approach your superannuation. Many of us choose to use it as a supplementary or substitute income source besides the pension itself.

However, the changes which come into effect in 2017 may change the way you decide to prepare for your retirement. Most of the changes mentioned below will become effective on the 1st of July, 2017 unless specified. 

 

The Transfer Balance Cap

One of the biggest changes is the enactment of a $1.6 million transfer balance cap on the total amount of accumulated superannuation funds you can transfer into the tax-free retirement phase. This means people will also be unable to make any further after-tax income contributions to their superannuation once they hit the $1.6 million dollar cap.

If you have more than $1.6 million when you retire, you will be forced to make a choice of what to do with your remaining funds. You can either choose to leave your savings in an accumulation superannuation account to be taxed at 15%, or you can choose to withdraw your money and remove it from the superannuation system entirely. 

 

Should I stop making voluntary contributions?

While many of us choose to make voluntary super contributions from our before tax income, concessional contribution taxes are also changing. While they are currently taxed at 15%, those who earn $250,000 a year will be taxed an additional 15% on top of that, causing them to have an effective tax rate of 30% on these contributions overall.

Concessional contributions will also be capped at $25,000 per year, down from the previous caps of $30 000 for those under 49, and $35,000 for those 50 and above. Additionally, non-concessional contributions will now be capped at $100 000 per year. This means that we will have less opportunity overall to contribute to our super at any age, but especially in the lead up to 65 when super contributions become more pressing and important. 

Transition to Retirement Income Streams (TRIS) are where an individual can begin to access a portion of their superannuation whilst still working, provided that they are of preservation age. As income from TRIS is tax-free, many soon-to-be retirees can choose to start one whilst contributing more money towards their superannuation through salary sacrifices. However, any income from TRIS will now be taxed at 15%, the same as income tax. These changes reduce your flexibility and freedom to contribute to your superannuation whilst still maintaining your current lifestyle when you choose to take on less hours, or your income decreases overall.

 

So, what can I do now??

In light of all these changes, one of the most important things to consider when preparing for your retirement is how much you have saved currently, and how much you should have saved by the time you retire. Talking to a financial planner or advisor ahead of time is a great idea to get some professional advice on your options for future-proofing your retirement, especially in light of the many changes coming up in 2017.

 

Is There Anything I Can Prepay to help lessen the load?

Considering ways by which you can lessen the financial burden on yourself and your loved ones before and after you go on the pension is also essential. Paying off any outstanding debts, pre-paying your funeral expenses (up to $12,500), purchasing a burial plot, or even investing in funeral bonds are just some of many options you may like to explore and ponder. 

As any money you pay for a prepaid funeral plan will not impact your retirement plans according to current legislation, this is an effective way of lessening the financial burden on your family, helping everyone to celebrate your life during and after your retirement.

At Lady Anne Funerals, we are happy to talk you through your options to find a prepaid funeral and service that suits you. Please access your complimentary guide to prepaid funeral options below. 

prepaid funeral planning

 

We're here to help

Lady Anne Funerals is here to support and assist your family through what can be a difficult time, with a ladies touch. 

We are available to discuss a range of services to support your family, including: 

  • Personalised memorial services
  • Cremation and burial services
  • Religious services catering to all faith's
  • No service, no attendance 

Please get in touch - night or day - via the form or you can call us on the number below.

Phone: 1300 74 00 74

904 Victoria Road, West Ryde 2114

Let's Talk

Some of the families we've helped

“I just wanted to send you our sincerest thanks for everything you and your incredible team did for us in making the most perfect day, celebration and farewell of our beautiful Harper.

I have given a lot of thought to your business and the industry and I think it is perhaps the most important business for families to get it right when it comes to planning a funeral which may be sudden or may be a long time in the making. Either way, when one is faced with the unfortunate situation of needing to arrange a funeral, only then do you realise the importance of getting it right.

We experienced first hand the polar opposites the industry offers. It is not just about the cars, the booklets, the music and all the things that make up the day - its about the service, the care and most importantly it’s about the people.

From our very first conversation we could sense your genuine care to our situation and your attention to detail was obvious - this was very different to the previous conversations we had with others we had been referred to. Those other companies wanted to commence meetings with the paperwork side of things upfront which is a very confronting thing to do just days after losing your loved one - and when one of the others that I am referencing couldn’t even refernece our daughters name as our meeting started - we were horrified of how poor the service of care could be.

This is where you and your team shine. After feeling very lost in our search to secure the perfect funeral director to create the perfect day, my wife all of a sudden recalled you standing out the front of your office each morning watering the surrounding gardens to ensure a beautiful front of house. Well, I can assure you, it is not just the front of house that is beautiful - its the entire package that is beautiful.

Your manner, your direction and your expertise is evident from the get go. Nothing is too hard for you or your amazing team. The personal care made us feel like we were the only funeral you were working with at the time, and that’s exactly how it should be.

The finer detail, such as driving past our house so our daughter could go past our house one last time, then leaving the most beautiful flowers on our doorstep, to bumping into us at the Church because you were just doing your own research to make sure the day was seamless. This combined with your recommendations from every aspect as everything was very foreign to us, you were able to guide us to achieve the most beautiful farewell.

The day itself was simply perfect. Not once did we have a concern. The car was shining, your team dressed beautifully, cold water provided for us, directions for our guests, directions for us. Everyone commented on how amazing the day was and how incredibly your team were. Seamless is the only word I can use. It doesn’t stop here.

Your personal care and guidance then allowed us a more intimate farewell the following day (we are so grateful for for this recommendation and possibly would have missed this special day if you had suggested it was the best idea). Again, you and your team made us feel like you had nowhere else to be, and no one else to help. Just us. The setting was beautiful, the celebrant (that you arrange and recommend) is a delightful, your team make this day even more special than the last.

This is something we never want to go through again but there will be so many others, that like us, have no idea where to start to look for the right funeral director for their own special day. All I can say is that I hope that they appoint Lady Anne Funerals. We learnt a lot quickly and it is again a business many do not ever consider needing but without question one of the most important businesses to select the right person and the right team.

I welcome any of your future potential clients to contact me if they wish to discuss our experience with the amazing Lady Anne team. We thank you for giving our beautiful baby the most incredible farewell that was exactly how we imagined it, you just made it happen.”

photo02_harper
Lee Dowdall
Karen has supported my Mum and me through the most difficult week of our lives as we not only planned a funeral, but interred my Dad to his new home. I will be forever grateful to Karen for her ongoing support, guidance, kindness, empathy and friendship over the last week. Karen has now become part of our extended circle of close family friends.
Daughter of the late Sveta Dordevich
Lady Anne Funerals has the compassion, understanding and empathy that many of the larger funeral homes do not possess. My aunts funeral was dignified and classy everything she deserved. I would highly recommend Lady Anne (and have) as they go above and beyond.
Joanne Marks
I am overwhelmed with the feedback on how beautiful it all was from all who attended. You and the other ladies were wonderful, looked so elegant, and made the day so very special for all who loved Paul.
Barbara Sommerville Enright
Karen and her staff treated us with the utmost respect we could not have been in better hands during this difficult time. My mum had organised her funeral with a prepaid funeral plan which she had purchased from Karen almost ten years ago this also made this upsetting time much easier to deal with and she got all the things that she wished for.
Malcolm Ellis
On behalf of my family, I would like to thank Lady Anne Funerals for a beautiful service yesterday for my aunt Dot. All who attended commented on how lovely the service was & the professionalism of all the staff. Thanks again very much for helping making a sad day one of celebration of Dot’s life.
Judith Neville

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