Could a prepaid funeral help reduce your assessable assets?

A prepaid funeral may help reduce your assessable assets.

Could a prepaid funeral help reduce your assessable assets?

Legislation changes to the Age Pension announced in the 2015/16 Federal Budget will take effect from 1 January 2017. These changes will see the thresholds applied to the Age Pension asset test increase at the lower end and reduce at the upper end. The taper rate, the rate at which Age Pension payments are reduced when the lower threshold is exceeded, will double. This means that for every $1000 the lower asset threshold is exceeded, Age Pension payments will reduce by $3 until the upper threshold is reached and no pension payment is due.

While many Australian age pensioners are concerned about the impact this will have on their pension payments and may look for ways in which their assessable assets can be reduced, it is imperative that you seek independent financial advice before making a decision. This should take into consideration your personal circumstances and financial goals.

If you think that a prepaid funeral may an effective means to reduce your assessable assets, here are the answers to some commonly asked questions:

Q. How can assessable assets be reduced?
A. Once such way is by purchasing a prepaid funeral plan, as the value of such plans when purchased through a funeral director is exempt from the asset test. Pensioners who are looking to reduce their assets to ensure they qualify for an Age Pension or maximise their Age Pension payment may wish to consider purchasing a prepaid funeral plan prior to 1 January 2017.

Q. What other assets are exempt from the asset test?
A. As well as the family home if it's a principal place of residence and prepaid funerals, burial plots are also classed as exempt assets. If your finances allow, you may also wish to consider paying some larger expenses, such as home renovations or a holiday before 1 January 2017. For details of other exempt assets, visit

Q. How does a pensioner take advantage of a prepaid funeral in these circumstances?
A. To take advantage of the exemption, pensioners must have a contract with a funeral director that sets out the services to be undertaken noting that there are no more expenses to be paid. There is no set maximum value of this investment.

Q. Are funeral bonds excluded as well?
A. Funeral bonds are not excluded from the asset test and are treated as financial investment as they earn interest. An exception is where the funeral bond is assigned to a funeral director as prepayment for contracted services and the owner has no other prepaid funeral assets. There are restrictions to this option with the Funeral Bond Allowable Limit as at 1 July 2016 being $12,500. This is indexed in line with CPI, annually on 1 July. A maximum of two qualifying bonds are also allowed under the asset test exemption.

To find out more about prepaid funerals, visit and request a call back from a prepaid funeral consultant.

You may also wish to find out more by visiting:
Asset threshold changes explained

The information above is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this advice you should consider its appropriateness having regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that impact your financial and legal circumstances.


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    22nd Sep 2016
    Actually the answer to the last question is incorrect as it implies that all funeral bonds not assigned to a funeral director are treated as an asset by Centrelink. This is incorrect.

    Funeral bonds, where they are not assigned to a specific funeral director/home are Centrelink exempt where they meet 2 specific criteria – see below.

    Care needs to be taken when you are providing information from “Sponsored Content” to ensure that its correct.

    From Centrelink's website -

    How we assess funeral bonds

    Funeral bonds that are assigned to funeral directors as prepayment for contracted services are assessed as prepaid funeral services. For other funeral bonds, we will not include the value of up to 2 bonds provided the following 2 criteria are met:

    • you do not also have prepaid funeral expenses, and
    • the amount invested in the bonds to be exempted does not exceed the Funeral Bond

    Allowable Limit

    The Funeral Bond Allowable Limit as at 1 July 2016 is $12,500 and is indexed in line with CPI pension increases every 1 July.

    You may have a joint funeral bond. If you do, we consider it a single bond when assessing your allowable limit. You and your partner may both contribute towards the single bond, in which case we assess both contributions against the Funeral Bond Allowable Limit.

    Funeral bonds that are not exempt are treated as financial investments. Your share of the current value including interest is included in your assessable assets and is deemed to be earning income under the deeming rules.
    22nd Sep 2016
    Prepaying your funeral is a good idea. I have chosen my own flowers, cask and herse. Funerals double in price every ten years so its economical. Go for it unless you have family who can pay $6-11,000.

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