The Centrelink assets test is changing

Over the past year, it has been highly publicised that the Centrelink Assets Test is changing. This came into effect on 1 January 2017, and is now in place.

This change has affected a number of pensioners who may now be receiving either an increased or a decreased pension, depending on their circumstances.

For most that have seen a change in their Centrelink entitlement, they will also receive a one-off payment that is different to both the previous pension AND the new pension. This one-off payment has led to some confusion for many pension recipients.

The reason for this is one-off payment is that part of the payment is being calculated on the Assets Test rules from last year, and the remainder is being calculated by the new rules.

Unfortunately, I have already discovered a few errors in the new Centrelink payments of some of my clients.  I would encourage everyone to check to ensure that you are receiving the correct Centrelink payment.

For those who have had a change to their Centrelink payment, it is likely to influence their overall financial situation and may be a trigger to review their financial plan.

For those lucky enough to receive an increase to their Centrelink payment, they will now be receiving a higher income. If they were living comfortably on the income they were previously receiving, it may be an opportunity to reduce the pension they draw from their Superannuation savings. This will help your Super last longer. Others will choose to use the increased income as an opportunity to improve their lifestyle.

Clients whose Centrelink income has reduced will face different issues. Reduced overall cash flow will negatively impact the ability to maintain living standards for those who didn’t previously have surplus income. It will be necessary for many to replace that shortfall in income. Increasing payments from Superannuation will be a popular strategy for many in this situation.

Some pensioners may be forced to liquidate assets so they are able to generate income to meet costs. Others will be forced to live on reduced income and will have to revisit their budget.

Although these changes have been publicised for some time, the implications for many pension recipients are only now being felt. There are, however, some strategies that will assist in reducing the effect of the Assets Test changes and will increase Centrelink entitlements over time.

We encourage those whose pension payments have changed to contact their financial adviser to discuss their situation.