1. Increasing eligibility for the Commonwealth Seniors Health Card
Who is it for: individuals that are over the age pension age but don’t receive an age pension benefit.
As announced in the Federal Budget, from 4 November 2022, the income threshold for Commonwealth Seniors Health Card holders increased from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.
Watch Iby Ibrahim, our Advice Strategy Expert explain what the changes could mean for you.
Find out more about the Commonwealth Seniors Health Card.
Hi, and thanks for watching our What's New video about a positive change to the Commonwealth Seniors Healthcare Card. Our advice strategy expert Iby is here to explain what’s new.
Hi, Iby. First of all, could you tell what it is and who it's for?
Hi Léa. The Commonwealth Seniors Health Care Card is a concession card that's available for those individuals that are over age pension age but not receiving an age pension benefit. So the concession card provides discounts on medication and depending on what state you are you were in, it might provide some other additional benefits.
It's been around for a while, so what's new?
what has changed is the income test. So amongst other criteria to get a Commonwealth seniors Health care card, you do need to pass an income test. The income test for couples is $144,000 and the income test for singles is $90,000. A fairly substantial increase that have taken place from the 4th of November this year. So anyone who is over age pension age not currently receiving age pension entitlements may now be able to qualify for the Commonwealth Seniors Health Care card.
What should people do if they think they're eligible?
So I think the first thing to do is just make a note of that to speak to your financial planner at your next appointment. Then the other thing is if you don't want to wait, you could reach out to Centrelink and make an application for the Commonwealth Seniors Healthcare card right away.
Thanks for that Iby. Now this is only general information. Everyone is different, so before you do anything, consider your own situation. Or better still, talk to your financial planner at your next appointment about what might be right for you. Thanks for watching our video.
2. Lower age limit for Downsizer Contributions
Who is it for: People aged over 55
From 1 July 2022, the lower age limit for making a downsizer contribution into super reduced from 65 to 60, with no upper age limit. On 12 December 2022, the lower age limit for making a downsizer contribution into super was further reduced to 55. This gives more flexibility to top up your money in super and potentially benefit from compounding returns and more money to live on in retirement.
Downsizer contributions allow you to make a one-off payment into super from the sale of your residential property, provided it has been your (or your spouses) main residence at some point in time.
Subject to meeting the eligibility criteria, you may be able to contribute up to $300,000 per individual (a total of $600,000 for a couple) into super from the proceeds of sale from your home. When you make this payment, it won’t count towards your contribution caps or total super balance restrictions, but it will be included in your transfer balance cap (the total amount of super you can transfer into a tax-free retirement account).
It’s important to note that there is no special Centrelink asset test exemption, so downsizing your home may have an impact on your age pension eligibility.
Learn more
Hi, and thanks for watching our What’s New video about a proposed change to downsizer contributions.
Our advice strategy expert Iby is here to explain what’s new.
Hi Iby. First of all, what are downsizer contributions and who are they for?
So Downsizer contribution is basically an incentive for people to sell their home and use the proceeds to contribute to super. So there's some qualification criteria. So someone needs to have owned their home for at least 10 years and they need to have lived in it at some point. There are some other qualifications as well, but if you sell your home for at least $300,000 or more you are able to make a downsizer contribution of up to $300,000.
What are the proposed changes?
Currently the Downsizer age is age 60, so you have to sell your home after age 60 to be able to make a downsizer contribution, and. the proposal is to actually reduce that age down to 55.
What should people do if they are thinking about downsizing?
So you want to make sure firstly that you're eligible to make a downsizer contribution. Before you consider making it there's some criteria that needs to be met and there's paperwork that needs to be completed, and it needs to be done in the right time frame. So what you should do is make a note of it to have a chat with your financial planner at your next meeting. And you can also do some research on the ATOs website if you wanted to do some reading about it.
Thanks for that Iby.
Now this is only general information. Everyone is different, so before you do anything, consider your own situation. Or better still, talk to your financial planner at your next appointment about what might be right for you.
Thanks for watching our video.
3. Change in the Work Test for making contributions to super
Who is it for: Retirees aged between 67-74
Before 1 July 2022, if individuals aged between 67 and 74 years old and making or receiving voluntary contributions^ into super individuals would have had to meet the work test. Under the work test you must work at least 40 hours over a 30-day period in the relevant financial year to be allowed to make personal contributions into super.
From 1 July 2022, the work test will no longer apply for anyone making super contributions up until 28 days following the end of the month in which they turn age 75 - except when claiming a personal super contribution deduction, which will continue to be subject to the work test. This makes it easier to add to your super when working a 'side hustle' in retirement. Personal contributions – both concessional and non-concessional must stay within contributions cap limits for the financial year.
^Voluntary contributions include salary sacrifice and personal deductible contributions as well as after-tax contributions made from savings or monies from other sourches such as proceeds from a term deposit that are contributed to super.
Hi, and thanks for watching our What's New video about a positive change to Super contribution caps.
Our advice strategy expert Iby is here to explain what’s new.
Hi, Iby. First of all, what type of contributions are affected?
Hi Léa. So we are talking about non concessional contributions. So it's the ability to contribute up to $330,000 of after-tax money into superannuation if you have less than $1.48 million in total Super balance.
How is that different from what we've been able to do in the past?
What changed in July was that the government abolished the work test. So what that means is anyone who is 67 to 74 who is retired can now contribute to superannuation with after tax dollars or non-concessional contribution. Prior to this, those people in that age group needed to meet the 40 hours in 30-day work test.
What should people do if they're thinking about making additional contributions?
So the most important thing to realize is that the contribution rules are complex. So what I would suggest is making a note to have a chat with your financial planner at your next appointment before you do anything.
Thanks for that Iby.
Now this is only general information. Everyone is different, so before you do anything, consider your own situation. Or better still, talk to your financial planner at your next appointment about what might be right for you.
Thanks for watching our video.
4. Work bonus
Who is it for: Age Pension recipients
For those receiving the Government Age Pension, changes were introduced to allow individuals to work and earn some income without impacting their age pension entitlements. Prior to this change, the income allowable amount was $7,800 per financial year. It has been increased by $4,000 up to $11,800. This is a temporary and one off increase to the work bonus income bank available until 31/12/2023. The work bonus income bank is set to revert back to $7,800 on 1/1/2024.
Hi, and thanks for watching our What’s New video about a positive change to the Work Bonus.
Our advice strategy expert Iby is here to explain what’s new.
Hi, Iby. First of all can you tell us what a work bonus is, and who can get it?
Hi Lea, so the work bonus is an initiative that allows pensioners, so age pensioners that is, to work and earn some income without impacting their age pension entitlements.
So what's changing?
So what the government has proposed and done is actually increased the amount of income someone can earn. So the income was the income allowable amount was $7800 and they've increased it by $4000 up to $11,800 for the financial year.
What should people do if they are thinking about earning a little extra income in 2023?
So I think the important thing is to have a chat to your financial planner at your next appointment about your eligibility, and also if you are doing some work, reach out to Centrelink to find out how you would go about reporting that extra income.
Thanks for that Iby.
Now this is only general information. Everyone is different, so before you do anything, consider your own situation. Or better still, talk to your financial planner at your next appointment about what might be right for you.
Thanks for watching our video.
5. Deeming rates for Age Pension income test frozen until 2024
Who is it for: People on the Age Pension
The income and assets tests are applied to help determine whether an individual is eligible to receive a full or part Age Pension.
Deeming rates are used within the income test. They apply to financial investments like cash, shares, managed funds to determine the level of income assessable under this test, regardless of how much an individual earn from these assets.
A lower deeming rate could improve Age Pension payment rates for income tested pensioners.
In August 2022, the federal government announced that instead of increasing with inflation, deeming rates will stay the same until 30 June 2024. The lower deeming rate will remain frozen at 0.25 per cent and the upper rate will stay at 2.25 per cent.
From 1 July 2022, the lower deeming rate applies to financial investments up to the threshold of $56,400 for singles and $93,600 for couples. The upper deeming rate applies for financial assets above these thresholds.
Find out more about deeming rates and how they could affect your Age Pension payments.
Hi, and thanks for watching our What’s New video about a positive change to Deeming Rates.
Our advice strategy expert Iby is here to explain what’s new.
Hi, Iby. First of all, can you tell us what deeming rates are, and who it affects?
The simplest way to think about Deeming is that it's an assumed rate of return that Centrelink used for financial assets. So if you've got money in the bank or some shares, rather than looking at what is the actual amount that you're earning on those investments, Centrelink will simply apply their assumed rate of return. So anyone who receives a pension from Centrelink will have their income assessed. So that was the basically all pensioners who received a Centrelink benefit.
So what's happening with deeming rates?
So what Centrelink announced was that they are actually freezing the deeming rates, so there's a lower threshold and an upper threshold they've announced they're freezing those rates through to July 2024. So the rates will stay at .25 for the lower end and 2.25 for the upper threshold.
Do people need to do anything about it?
So what it means is if you've got some money in the bank with interest rates rising, we actually don't need to be concerned as to whether or not the change in interest rates will actually impact your age pension. So if you have some money in the bank, don't be concerned. Look to earn as much interest as you can, and rest assured that the change in interest will not impact your age pension. And is that the same for other investments like shares and managed funds? Correct. It is. So all those sitting there, the bucket of financial assets and regardless of what you earn, they will simply apply the deeming rates.
Thanks for that Iby.
Now this is only general information. Everyone is different, so before you do anything, consider your own situation. Or better still, talk to your financial planner at your next appointment about what might be right for you.
Thanks for watching our video.
Disclaimer
+Source: Bankrate Side Hustles Survey, May 8-10, 2019.
This is general information only and does not take into account your specific objectives, financial situation or needs. Seek professional financial advice, consider your own circumstances and read our Financial Services Guide, any relevant product disclosure statement & Target Market Determination, before making a decision. Call us or visit our website for a copy.
Issued by Aware Financial Services Australia Limited (ABN 86 003 742 756, AFSL No. 238430), wholly owned by Aware Super (ABN 53 226 460 365) whose trustee is Aware Super Pty Ltd (ABN 11 118 202 672, AFSL 293340).