From 1 January 2015 there will be significant changes to the means testing arrangement for superannuation pensions and social security benefits, such as the Age pension and the Commonwealth Seniors Health card.
Tougher means testing will see the valuable ‘deductible amount’ removed from the assessment of super pensions for Age Pension entitlements; resulting in an individual’s entire superannuation pension being assessable under the deeming rules.
Comparing the current deductible system to the proposed deeming system, it will have the greatest effect on those with more modest superannuation balances, where the income test will be the dominant test.
There is respite for current super pension and social security recipients however, with ‘grandfathering’ to apply to the current means tests.
There are risks however if you have change in circumstances or breach the grandfathering rules.
Risky moves include:
- Not drawing the minimum pension amount from a super pension;
- You pass away and you don’t have a reversionary super pension payable to your spouse;
- You stop a super pension for any reason.
- You exceed the assets test cut-off threshold through an inheritance or by downsizing your family home;
- Your spouse passes away and your are no longer assessed as a couple;
- You exceed the income test cut-off threshold.
Commonwealth Seniors Health Card
- You exceed the future income test limits;
- You go overseas for more than 19 weeks.
Where circumstances see your existing super pension or Government benefit ceased, any new super pension or Government benefit commenced in the future will be assessed under the tougher rules. This will likely result in less Government benefits being paid, or in some cases you may become ineligible altogether.
Before you make changes to your super pensions or you believe you may have a change in circumstances that would impact your old benefits speak to us to ensure that you don’t make a mistake you will regret.