Changes for retirees under the new Labor government

On 21st May 2022 Australians decided to have a change of the government, and after almost 10 years of the Liberal party being in power, now Australians voted Labor to take control and to govern Australia into the future. 

This website and our business is most certainly a non-political one, I will post no opinions or judgement of the last election outcome, however as a financial planner, I will provide you with my point of view as to the benefits or negatives of policies and rules being introduced, that might impact financially your retirement.  

And today I will give you 4 election proposals introduced by the Labor Party that are to be introduced very soon and I will explain what impact those proposals will have on your retirement. 

Information introduced today is based on details announced during the election campaign and they are proposals at this point in time, and legislation will need to be passed for those measures to take effect. However, considering that the opposition has been supporting those proposals, or they had a very similar version of those proposals, it is expected that most of them will be introduced from 1st July 2022.   

1. Freezing of Deeming Rates

Considering changes within the word economy and ongoing increase of inflation, an impact it has on our interest rates, I have already been sharing my concern with retirees, to expect the increase of deeming rates, which would be a negative outcome for most pensioners, especially those that are on part Age Pension due to Income Test.

Therefore, the proposal of freezing deeming rates for a period of 2 years until 2024 is most welcomed and very positive for all retirees. And now with such volatility of the market and super or pension funds providing negative returns, so the balance of super or income streams might have reduced, many more retirees might be eligible for Age Pension. This is worth checking, and if unsure, you need to speak to a specialist retirement planner to see if there is any chance for you to be eligible for part Age Pension or to increase your exiting entitlement.

Going back to the freezing story, the proposal is to continue the current level of deeming rates, regardless of the actual market rates, so as a refresher:

Therefore, we see this proposal as a huge benefit for retirees for the next 2 years and this proposal if legislated, and it is supported by the opposition, it is to commence on 1st July 2022.

2. Increasing eligibility for the CSHC

The new government also wants to relax the eligibility for the Commonwealth Seniors Health Card, which if legislated will allow an extra 50,000 Australians aged 67 or older to gain access to this valuable card.

I have already created a separate article explaining the full range of benefits of the Commonwealth Seniors Health Card: Centrelink Concession Cards for your Retirement, so feel free to read it.

The CSHC is the card for self-funded retirees who are not eligible for the Age Pension and for the Pensioner HealthCare Card.

The CSHC is Income Tested only and those are proposed changes:

Another great proposal that is supported by the opposition, so we believe it is very likely it will commence from 1st July 2022.

3. Extending the exemption on home sale proceeds

Currently when you sell your family home, the rules are that Centrelink will exempt from the Assets Test the portion of funds that you indent to use to purchase or build a new primary residence. That exemption is for the period of 12 months.

Please remember though, that there is no Income Test exemption, therefore the full balance from the sale of your family home will be assessed under the Income Test, which could impact on your Age Pension eligibility, or the level of Age Pension received. So please make sure you check all those details before you actually sell your home and put yourself in a dire situation.

But there is a proposal to extend the 12 months up to 24 months, giving pensioners more room for those big changes as home downsizing. The proposed commencement of this exemption is 1st January 2023.

4. Cutting the cost of prescription medicine 

Given that older people are more likely to use more medication that young people, obtaining medication that is included in the Pharmaceutical Benefits Scheme is very beneficial, as cost of such medicine has been significantly reduced.

Currently the cost of drugs under the PBS is capped at $42.50. The Coalition promised to reduce it down to $32.50, while Labor promised to reduce it down to $30.00 per prescription filled.

Given both parties agreed on this measure, it is expected for the reduction to be introduced from 1st January 2023.  

Here we go, 4 positive measures to look forward to on your retirement.  

If you are getting ready for your retirement or you have already retired, but would like to check if your financial set up is the most beneficial long term, feel free to reach out and organise the time for us to review your situation.  

Retirement is a Journey, not a Destination, so be well prepared for the ride.