GST slugs affluent retirees

Self-funded retirees are emerging as one of the real victims of the imminent introduc-tion of the GST.

Self-funded retirees are emerging as one of the real victims of the imminent introduc-tion of the GST.

Challenger Life technical services manager Alex Dunham says self-funded retirees will not be compensated for the rise in prices associated with the introduction of the GST unlike retirees who rely on the pension for income.

“Self-funded retirees invested wholly in allocated pensions or other tax effective re-tirement vehicles will be hit hard by the price increases,” she says.

“Investors in assets test exempt annuities which allow them to qualify for a full or part age pension will reap the benefits of the Government GST compensation measures.”

Denham says social security and veterans affairs payments will rise 4 per cent as will other allowances such as pharmaceutical (4 per cent) and rent assistance (7 per cent).

Income and asset test-free areas for pensions and allowances will also increase 2.5 per cent. Currently, every dollar of income above the test free area reduces the pension by 50c. This is to decrease to 40c. The Government estimates that this will result in about 50,000 extra people becoming eligible to receive a part pension and the Pensioner Concession Card.

Denham says the changes should act as a warning bell for advisers to ensure their re-tiree clients have structured their portfolios with the changes in mind.

“Advisers should be getting up to speed on these issues and identifying clients who may need to restructure in light of tax reform, or at the very least assessing who may be eligible to claim a bonus.”