Important social security changes from 1 January 2015

Important social security changes from 1 January 2015

If you are currently in receipt of an income support payment (age pension, disability pension, NewStart, Carers payment), or are eligible to receive this payment before 1 Jan 2015, you may be affected by the new rules.

It may be beneficial for you to commence an account based pension prior to 1 Jan 2015, or at least review your situation so that you can receive the most beneficial treatment for your situation. If you are in receipt of an income support payment and you have commenced an account based pension prior to 1 Jan 2015, then the current rules will be grandfathered (i.e. no change to your situation).

The new rules state that from 1 January 2015, account-based pensions that are not grandfathered will be treated as financial investments for Centrelink purposes. This could result in you being tested under the income test and may result in a smaller Centrelink payment. Currently account-based pensions are treated quite favourably for the income test whereby a portion of the income that you receive from your account based pension is considered a return of capital and therefore does not form part of your assessable income for Centrelink purposes.

What you could do:

  • Refresh existing account-based pensions (particularly relevant where you have an SMSF).
  • Review account-based pensions and consider the benefits of consolidation.
  • Review the current provider/platform of your account-based pension and ensure it is still appropriate.
  • Commence an account-based pension.
  • Consider adding a reversionary beneficiary, where appropriate, to extend grandfathering status after the death of the primary beneficiary. We need to consider the age of your spouse or dependent and any impact this will have on your payments.

Commonwealth Seniors Health Care Card (bill introduced)

The Government proposes to include deemed income from account-based pension investments in the assessment of income when determining eligibility for the Commonwealth Seniors Health Card (CSHC). Currently the income assessment is based on adjusted taxable income (taxable income plus reportable fringe benefits, reportable employer superannuation contributions, foreign income and net investment losses) which excludes tax-free pension income.

Grandfathering provisions will be in place for account-based pensions commenced prior to 1 January 2015 for self-funded retirees in receipt of the card by that date.

What you could do:

If you are a  self-funded retiree apply for the CSHC before 1 January 2015 if you are in receipt of an account-based pension (or are in a position to commence one before that date.)

Please call us today on (02) 9970 3111 and we will work with you to structure the most favourable outcome for your overall aged care needs.

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