Q My wife and I are 73 own our own home and receive a part Age Pension. Our combined assets assessable for Assets Test purposes from Centrelink are around $860,000. Will the announcements in Tuesday night’s Federal Budget impact our Age Pension? If so from when?
In Tuesday night’s Budget, Joe Hockey announced changes to the Assets Test for the Age Pension. From 1 January 2017 the Asset test taper will reduce fortnightly pensions by $3 per fortnight per $1,000 as opposed to the current amount of $1.50. The current assets test free threshold of $286,500 for couples owning a home will be raised to $375,000. For single homeowners, the revised threshold is $250,000.
By my calculations, couples on the Age Pension who own their own home with less than $451,000 ($289,500 for singles) of assessable assets will receive a higher benefit, those over this amount will receive less then they receive now. A couple who own their own home with more than $823,000 ($547,000 for singles) will lose their Age pension benefits. As a consequence you will lose your Age Pension benefits from 1 January 2017.
The Budget announcement also indicates that individuals who lose their pension benefits due to Asset test changes will automatically be issued with a Commonwealth Seniors Health Card or a Health Care Card. I cannot find any detail in the budget papers to clarify how this will work so stay tuned.
Q My daughter is working in the UK as an accountant and has an accumulated Higher Education Loan Programme (HELP) debt. She has no Australian derived income. What will the announced changes in the Budget mean for her?
A From 1 July 2016, Non-resident Australians with a Higher Education Loan Programme (HELP) debt will be required to make payments if their worldwide income exceeds the minimum income threshold on the same basis as residents in Australia. Your daughter will be obliged to make loan repayments once her income reaches $54,126. The initial repayment rate is 4% and increases as her income rises. The maximum repayment rate is 8% when her income exceeds $100,520. Payments will fall due in the 2017-2018 tax year based on income earned in the previous tax year. As to how she will be notified of her liability, I have no idea. We will need to wait for the legislation.
Q I operate a business that employs students on working holidays from around the world. What changes have been announced in relation to how they are taxed and effective from when?
A People who are temporarily in Australia for a working holiday aka “backpackers” will be treated as non-residents for tax purposes, regardless of how long they are here. This means they will be taxed at 32.5% from their first dollar of income. The current arrangements provide an $18,200 tax free threshold before they are liable for income tax. This measure is proposed to apply from 1 July 2016.