Federal Budget 2015/16

At 7.30pm last night, Treasurer Joe Hockey handed down his second Federal Budget, with an emphasis on "boosting jobs, growth and opportunity" and "progressing budget repair in a responsible, measured and fair way"

Mr Hockey promised no new taxes on super under this Government and a $44 billion spend on the Age Pension, making it the single largest spend proposed in the Budget.

The Government also withdrew its controversial plans to change Age Pension indexation arrangements, but announced that it will change Age Pension assets test thresholds, impacting on the Centrelink entitlements of many retirees.

We've outlined the proposed changes we feel are important to our members below.

Changes affecting seniors

Age Pension asset test

Thresholds

The Government plans to change Age Pension assets test thresholds.

This is likely to benefit retirees with lower asset levels, potentially increasing their Centrelink Age Pension entitlements.

At the top end, retirees with higher asset levels are likely to see a reduction in Centrelink Age Pension entitlements, with those above the top thresholds (see below) losing access to entitlements completely.

Singles

Home owner
  Lower threshold Top threshold
$250,000
(previously $202,000)
$547,000
(previously $775,500)
Non-home owner $450,000
(previously $348,500)
$747,000
(previously $922,000)

Couples (combined)

  Lower threshold Top threshold
Home owner $375,000
(previously $286,500)
$823,000
(previously $1,151,500)
Non-home owner $575,000
(previously $433,000)
$1,023,000
(previously $1,298,000)

Taper rate

The assets test taper rate at which the Age Pension begins to phase out will increase to $3 (from $1.50) of pension per fortnight for each $1,000 of assets over the relevant assets test threshold.

This means that for every $1,000 in assets you have above the lower thresholds (outlined in the tables above), your fortnightly Aged Pension payment will reduce by $3.

Effective date: 1 January 2017

Seniors Health Card guaranteed

The Commonwealth Health Seniors Card (CSHC) provides many seniors with discounts (or concessions) on PBS prescription medicines, bulk-billed doctor appointments and cheaper out-of-hospital medical expenses through the Medicare Safety Net.

Anyone affected by the scaling back of the top asset threshold is guaranteed eligibility for the CSHC or Health Care Card.

Effective date: 1 January 2017

Age Pension access while overseas

The Government is reducing, from 26 weeks to 6 weeks, the period that some recipients of the Age Pension, Wife Pension, Widow B Pension and Disability Support Pension can be paid their full basic means-tested rate while absent from Australia. They will receive a proportional benefit after that.

This applies to those who have lived in Australia for less than 35 years.

Effective date: 1 January 2017

Defined benefit schemes

Some superannuants who receive a defined benefit income will have a larger proportion of their super income included in the pension income test.
Under proposed changes, the proportion of defined benefit income that can be excluded from any income test (the deductible amount) will be capped at 10%.

Those who receive Veteran Affairs pensions or Defined Benefit income streams paid by military super funds will exempt from these changes.

Effective date: 1 January 2016

Superannuation

Early access for the terminally ill

Under current regulations, a person may qualify for early access to their superannuation if they obtain certification from medical specialists stating that they are suffering a 'terminal medical condition' and have less than 12 months to live.

The Government will extend this period to 24 months.

Effective date: 1 July 2015

Paid parental leave (PPL) schemes

New criteria will restrict individuals to one PPL scheme; either paid by the employer, or paid by the Government.

Superannuation is not included under the the Government's PPL scheme. Therefore, there is concern that this change has the potential to exacerbate the retirement savings gap experienced by women.

Effective date: 1 July 2016

Changes not going ahead

The Government has withdrawn several changes announced in last year's Federal Budget, among them, the hotly contested changes to Age Pension indexation rules.

Below are details on some of the changes that will not be going ahead.

Age Pension indexation

The Age Pension is currently indexed at the greater of three rates (CPI, AWOTE or MTAWE). This means a person's Age Pension payments generally change by a percentage each year, determined by the rate that's applied.

Last year, the Government announced plans to change Age Pension indexation to CPI only. With CPI being lower than other rates in recent years, this announcement caused concern for many.

The Government retracted this change and the Age Pension will continue to be indexed under the current arrangement (ie twice yearly to the greatest indexation rate).

Social security deeming rate thresholds

Changes to deeming rates thresholds announced last year will not go ahead.

Deeming rate thresholds will remain the same.

Income test-free areas

Plans to freeze indexation of the income test-free thresholds will not proceed.

Instead, the pension income test free areas and deeming thresholds will continue to be indexed annually by the CPI.

At 7.30pm last night, Treasurer Joe Hockey handed down his second Federal Budget, with an emphasis on "boosting jobs, growth and opportunity" and "progressing budget repair in a responsible, measured and fair way"

Mr Hockey promised no new taxes on super under this Government and a $44 billion spend on the Age Pension, making it the single largest spend proposed in the Budget.

The Government also withdrew its controversial plans to change Age Pension indexation arrangements, but announced that it will change Age Pension assets test thresholds, impacting on the Centrelink entitlements of many retirees.

We've outlined the proposed changes we feel are important to our members below.

Changes affecting seniors

Age Pension asset test

Thresholds

The Government plans to change Age Pension assets test thresholds.

This is likely to benefit retirees with lower asset levels, potentially increasing their Centrelink Age Pension entitlements.

At the top end, retirees with higher asset levels are likely to see a reduction in Centrelink Age Pension entitlements, with those above the top thresholds (see below) losing access to entitlements completely.

Singles

Home owner
  Lower threshold Top threshold
$250,000
(previously $202,000)
$547,000
(previously $775,500)
Non-home owner $450,000
(previously $348,500)
$747,000
(previously $922,000)

Couples (combined)

  Lower threshold Top threshold
Home owner $375,000
(previously $286,500)
$823,000
(previously $1,151,500)
Non-home owner $575,000
(previously $433,000)
$1,023,000
(previously $1,298,000)

Taper rate

The assets test taper rate at which the Age Pension begins to phase out will increase to $3 (from $1.50) of pension per fortnight for each $1,000 of assets over the relevant assets test threshold.

This means that for every $1,000 in assets you have above the lower thresholds (outlined in the tables above), your fortnightly Aged Pension payment will reduce by $3.

Effective date: 1 January 2017

Seniors Health Card guaranteed

The Commonwealth Health Seniors Card (CSHC) provides many seniors with discounts (or concessions) on PBS prescription medicines, bulk-billed doctor appointments and cheaper out-of-hospital medical expenses through the Medicare Safety Net.

Anyone affected by the scaling back of the top asset threshold is guaranteed eligibility for the CSHC or Health Care Card.

Effective date: 1 January 2017

Age Pension access while overseas

The Government is reducing, from 26 weeks to 6 weeks, the period that some recipients of the Age Pension, Wife Pension, Widow B Pension and Disability Support Pension can be paid their full basic means-tested rate while absent from Australia. They will receive a proportional benefit after that.

This applies to those who have lived in Australia for less than 35 years.

Effective date: 1 January 2017

Defined benefit schemes

Some superannuants who receive a defined benefit income will have a larger proportion of their super income included in the pension income test.
Under proposed changes, the proportion of defined benefit income that can be excluded from any income test (the deductible amount) will be capped at 10%.

Those who receive Veteran Affairs pensions or Defined Benefit income streams paid by military super funds will exempt from these changes.

Effective date: 1 January 2016

Superannuation

Early access for the terminally ill

Under current regulations, a person may qualify for early access to their superannuation if they obtain certification from medical specialists stating that they are suffering a 'terminal medical condition' and have less than 12 months to live.

The Government will extend this period to 24 months.

Effective date: 1 July 2015

Paid parental leave (PPL) schemes

New criteria will restrict individuals to one PPL scheme; either paid by the employer, or paid by the Government.

Superannuation is not included under the the Government's PPL scheme. Therefore, there is concern that this change has the potential to exacerbate the retirement savings gap experienced by women.

Effective date: 1 July 2016

Changes not going ahead

The Government has withdrawn several changes announced in last year's Federal Budget, among them, the hotly contested changes to Age Pension indexation rules.

Below are details on some of the changes that will not be going ahead.

Age Pension indexation

The Age Pension is currently indexed at the greater of three rates (CPI, AWOTE or MTAWE). This means a person's Age Pension payments generally change by a percentage each year, determined by the rate that's applied.

Last year, the Government announced plans to change Age Pension indexation to CPI only. With CPI being lower than other rates in recent years, this announcement caused concern for many.

The Government retracted this change and the Age Pension will continue to be indexed under the current arrangement (ie twice yearly to the greatest indexation rate).

Social security deeming rate thresholds

Changes to deeming rates thresholds announced last year will not go ahead.

Deeming rate thresholds will remain the same.

Income test-free areas

Plans to freeze indexation of the income test-free thresholds will not proceed.

Instead, the pension income test free areas and deeming thresholds will continue to be indexed annually by the CPI.