Assets taper test to impact aged-care

20 May 2015

Proposed changes to the assets taper test could have negative implications for part pensioners and older Australians looking to downsize and move into a retirement community or aged care facility, Aged Care Gurus has said.

From 1 January 2017 the government has proposed to increase the assets taper test - the amount by which a person’s pension entitlement decreased under the assets test - from $1.50 to $3 per fortnight for every $1000 of assets above the lower threshold.

The lower assets threshold would also rise for both homeowners and non-homeowners should these changes be adopted.

“It’s really important to stress that people on the full pension with the lowest means are not going to benefit at all from these changes,”

“It’s designed to benefit the people in the middle - people who are just over the asset test threshold.

“The very wealthy won’t get a pension at all,”

The Colonial First State’s (CFS) Firsttech federal budget briefing paper released last week said government forecasts predicted about 91,000 people would lose their entitlement to the pension, 235,000 would have their pension reduced and 170,000 would get a pension increase if these changes went ahead.

“Under these proposed changes the assets test taper rate will return to the 2007 level and will result in a substantial reduction in the upper assets test threshold,” the report said.

Financial planners needed to be aware of the potential for change and the impact on aged care placements should the proposals be adopted,

“What the government has done is put a greater emphasis or advantage on people who keep the family home [as an asset] rather than sell it when they move into aged care,”

“People who downsize their home to move into a retirement community or aged care facility often pay less than the value of their home.

“Under this change downsizers may be better off paying an amount that is equal to or greater than the value of their current home.”