The current system is complex and inequitable, and those most affected by aged care anomalies are often least able to understand the consequences.
Tag Archives | assets test
Pensioners with assets that fall within the range of the Assets Test taper are subject to effective marginal tax rates in excess of 100%. In fact, retirees face many higher marginal rates than workers.
It’s become common to claim there is no incentive to save more than $500,000 because of the loss of age pensions and possibly franking credits. But these arguments overlook the way super is supposed to operate.
Gifting assets in the hope of increasing social security entitlements can be self-defeating. If certain financial levels are breached, the assets gifted remain assessable to the original owner.
As pensioners and advisers adapt to the asset test changes, they should not place a different value on a dollar of income and a dollar of accumulated capital to support a retiree’s lifestyle.
With the new pension rules, the magic number is 7.8%. If a pensioner sells an asset to fund an improvement in the family home, the pension may increase $7,800 pa for every $100,000 over the assets test.
From 1 January 2016, the aged care means test changed to include the value of any rental income received on the former family home. This and other proposed changes will affect aged care users differently.
Questions asked by financial advisers on how changes to social security means testing will affect their clients mostly centre around the assets test, rent exemptions, and income streams.
The government has announced changes to the pension asset test and taper rate effective 1 January 2017. While good news for many less affluent recipients, it means wealthier pensioners will receive less, or none at all.
Seniors entering a new relationship want to enjoy their late-life happiness, but some may also worry about how the new arrangement will affect their income and estate planning. There are many options to consider.