Preparing for the asset changes

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.