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File name: wealth creation
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2. Age pension changes
1 January 2017

3. This is general advice only
This presentation was prepared by Bridges Financial Services Pty Limited (‘Bridges’). ABN ASX Participant. AFSL Number This is general advice only and has been prepared without taking into account your particular objectives, financial circumstances and needs. Before making any decision based on this presentation, you should assess your own circumstances or consult a financial planner. The examples used are for illustrative purposes only. A Product Disclosure Statement(s) (PDS) for the product(s) outlined in this presentation is available from your financial planner which you should consider before deciding whether to acquire this product(s). You may also contact our Client Advisory Services on (free call) between Monday to Friday 9.00am to 6.00pm (Sydney time). To the extent permitted by law, Bridges, its officers, employees, agents, consultants, advisers and representatives are not liable for any loss or damage as a result of any reliance placed on the contents of this presentation. In referring customers to Bridges, <insert name of referral partner, ABN and AFSL> does not accept liability or responsibility for any act or omission or advice provided by Bridges or its Authorised Representatives. Bridges is part of the IOOF group.
Before we start, I need to point out that the information in this presentation is general advice only and not personal advice. This means that the advice doesn’t take into account your personal objectives, financial circumstances and needs.
You should carefully assess your own circumstances or consult a financial planner before making any decision based on this presentation.
Note to planner
Using the above text when this slide is displayed (not just leaving the slide on-screen for a brief period while you talk about something else) may assist in confidence building at the beginning of your presentation, adding to your credibility and professionalism.
You may choose to delete paragraphs 3 and/or 4 if examples are not used nor products discussed in your presentation.

4. What has changed?
The asset test
The income test

5. Centrelink means testing
Means testing includes:
An asset test
An income test
Both tests are applied to benefit recipients
The test with the worst outcome is applied

6. Centrelink means testing
There have been changes to:
The asset test
The income test
Both tighten access to Centrelink benefits

7. Asset test

8. Asset test increase
As at 1 January 2017 you may qualify for the full age pension with more assets
$250,000 for a single homeowner
$375,000 for a homeowner couple
$450,000 for a single non-homeowner
$575,000 for a non-homeowner couple
Centrelink means test changes

9. Asset test increase The taper rate also increased:
To $3 per $1,000 from $1.50 per $1,000
This taper rate is applied when assets exceed the lower threshold

10. Asset test rebalance What does this mean?
A lower pension for some people
Pension cut-off points will be lower
Lose pensioner concession card but get CSHC
Your situation
Previous cut off point
Current cut off point
Difference
Single, homeowner
$793,750
$542,500
- $251,250
Single, non-homeowner
$945,250
$742,500
- $202,750
Couple, homeowner
$1,178,500
$816,000
- $362,500
Couple, non-homeowner
$1,330,000
$1,016,000
- $314,000

11. Asset test rebalance What does this mean?
Some pensioners areaffected
If assessable assets are at the new cut-off point
Your situation
Current pension at cut-off points
Single, homeowner
$9,798
Single, non-homeowner
$7,907
Couple, homeowner
$14,102
Couple, non-homeowner
$12,230

12. Asset test – the tipping points
Homeowner couples with combined savings of between $296,501 and $453,475 may receive a larger age pension
As an example, a homeowner couple with $375,000 in assets will have their age pension increased by $116 per fortnight
Homeowner couples with combined savings above $453,500 are negatively affected

13. Income test

14. Income test changes
Starting 1 January 2015, there were changes to the income test
Defined benefit pensions, fixed term and lifetime annuities exempt
New account-based pensions are ‘deemed’
Assumed to earn a certain amount of interest
Assumed earnings included in the income test assessable amount
Previously a portion of each self funded pension was exempt
Deductible Amount = Purchase price ÷ Relevant number
Grandfathering provisions apply
Grandfathering applies if you had a pension and
received Centrelink benefits (as at 31 December 2014) and
you do not discontinue that pension

15. Income test changes Case study before 1 Jan 2015
Bob (single age 65)
Invested $200,000 in his own pension
Average life expectancy 65 male = years
Amount disregarded by Centrelink = $200,000 ÷ = $8,838 per year
Minimum pension payment ($200,000 x 5%) = $10,000
Amount disregarded by Centrelink = $8,838
Amount counted by Centrelink = $1,162
The income test counts only $1,162
Note: the asset test could have a worse outcome

16. Income test changes Case study after 1 Jan 2015
Bob (single age 65)
Invested $200,000 in his own pension
Average life expectancy 65 male = years
Amount deemed as income by Centrelink
first $49,200 at 1.75% = $861
balance ($150,800) at 3.25% = $4,901
The income test counts $5,762

17. Income test changes What does this mean?
The deeming rates are monitored on an ongoing basis
Any changes usually coincide with the indexation of pensions
Good if your investments earn more
Bad if your investments earn less
Income test for pension entitlements now more severe
The income test is more severe!
$5,762 versus $1,162

18. Income test change for defined benefit pensions
Income test of defined benefit pensions before 1 Jan 2016:
Amount counted as income for Centrelink = Pension payment – tax free amount of pension
Income test of defined benefit pensions after 1 Jan 2016:
Same as above, except where the tax free amount is greater than 10 per cent of pension payment, only up to 10 per cent can be used to reduce assessable income
Military defined benefit pensions are excluded from the change

19. Income test change for defined benefit pensions – example
Bob (single age 65)
Received defined benefit pension of $25,000 per year
Tax free amount of pension = $3,000
Amount counted as income for Centrelink
= $25,000 - $2,500 = $22,500

20. Summary Changes to asset and income tests Changes to taper rate
Changes to eligibility for CSHC – if PCC is lost
There are winners and losers – generally those with higher levels of assets lose but some people with lower asset levels also lose

21. Concession cards

22. Concession Cards Pensioner Concession Card
Commonwealth Seniors Health Card
State based
Eligible if receiving a Centrelink or DVA pension
Federal
Eligible if pension age and not getting pensioner concession card

23. Commonwealth Seniors Health Card
Meet an income test (no assets test).
Automatically lost if Age Pension lost due to 1 Jan 2017 assets test changes
Adjusted taxable income, indexed on 20 September each year, and
A deemed amount from account-based income streams
You should have an annual income of less than:
$52,7961 for singles
$84,4721 for couples combined, or
$105,5921 for couples combined, couples separated by illness or respite care, or where one partner is in prison
1 The income limit is increased by $ for every child you care for
1 20 September 2015 limits – subject to change

24. Commonwealth Seniors Health Card
Discounts on PBS prescription medicines
May also get discounts or a concession on:
bulk billed doctor appointments, at the discretion of the doctor
cheaper out of hospital medical expenses
Concessional rail travel on Great Southern Rail services
In some instances, state-based concessions (discretionary) for
household rates, transport, education and recreation

25. Low Income Health Care Card
Meet an income test (no assets test).
Automatically lose if Age Pension lost due to 1 Jan 2017 assets test changes
For a 8 week period ending day claim is submitted, Income must be less than:
$4,2961 for singles ($537 per week)
$7,4241 for couples combined ($928 per week).
1 The income limit is increased by $ for every child you care for. Rates current as at 20 September 2016
Income includes:
a social security pension or benefit
if the person is receiving a social security pension or benefit - the person's income maintenance tested amount (if any), and
a pension or ISS, DFISA payable under the VEA, and
a payment of compensation

26. Pensioner Concession Card
Issued by Centrelink or DVA
As per CSHC, plus state-based concessions eg:
Energy
State health concessions
Rates and utilities
Stamp Duty
Public transport
M/V registration
Get if you receive any of these payments:
Age Pension[1] Bereavement Allowance[2] Carer Payment[3] Disability Support Pension[4]
Newstart Allowance[5] or Youth Allowance[6] as a job seeker if you are single, caring for a dependent child, and looking for work
Parenting Payment[7] single
You may also get a Pensioner Concession Card if you are aged over 60 and for more than 9 months have been receiving:
Newstart Allowance[5] Parenting Payment[7] partnered Partner Allowance[8] Sickness Allowance[9] Special Benefit[10]
Widow Allowance[11]
You may also get a Pensioner Concession Card if you have a partial capacity to work and you are receiving:
Newstart Allowance[5] Parenting Payment[7] partnered Youth Allowance[6] as a job seeker
If you find a job, you may be able to keep your Pensioner Concession Card for a short time.
From 1 January 2014, customers who are no longer eligible for Parenting Payment single, due to their youngest child turning 8 years of age, will still be entitled to their Pensioner Concession Card for a period of 12 weeks from the date their payment is cancelled.

27. Strategies Asset reduction
Pensioner bonus scheme – apply early for bonus if not already receiving income support
Residential aged care – if pension reduces think about renting out home to generate cashflow – but beware, Centrelink assessment of former home (rented out) changes from 1 January Affects people who entered care on or after 1 January 2017.
Rental income assessable
Value of home assessed as asset after 2 years of entering care

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