Navigating the new year: Key changes affecting pensions, tax cuts, and more in 2024

As the new year approaches, its time to note a few of the big things that are about to change on January 1 – and to flag a few things that are likely to change throughout 2024.

Work Bonus credit legislation passes parliament and becomes law.

Work Bonus is the system that allows you to continue working and still claim an Age Pension. Normally, people on either a full or part Age Pension can earn up to $300 a fortnight in addition to the normal income test, income free amount. (For Singles, that’s $204 a fortnight and for couples, a combined $360 a fortnight).

If you don’t use it from one fortnight to the next, it accumulates to a maximum of $7,800 for a year.

In simple terms if you had the full amount in your work bonus bank and got a job that paid a hefty $6,000 for a single week’s work ? None of that $6,000 would affect your pension and you would still have $1,800 left in your work bonus credit bank.

From January 1, each person will have an additional $4,000 per annum added to their work bonus bank account. That means potentially, up to $11,800 can be earned before you lose any pension because of employment related income. Yes, it includes self-employment as well.

It’s also added to new pensioners on the day the pension is granted. That means for example, you could continue to help out during a hand-over period and still get paid up to $4,000 before that income is assessed.

Carer Allowance

For those of you who care for a loved-one, perhaps your partner, an elderly parent or friend; the little understood Carers allowance increases on January 1 to $153.50 a fortnight.

It is probably the least-claimed Centrelink benefit, simply because people don’t know about it.

As the carer, your household income needs to be less than $250,000 per annum to qualify. The person being cared for typically needs at least 20 hours per week of assistance and you will need to have a questionnaire completed by a health professional looking after them (typically their GP). Things like, helping them with their medications, meals, dressing them, etc. You don’t need to be living with them in their home to claim the allowance and it is in addition to other benefits.

Tax Cuts

Subject to surviving the May Federal Budget, the Stage 3 tax cuts are already law and set to kick-in form July 1. The following diagram from CFS technical, allows you to readily see the scale of what’s now, just 6 months away. For those approaching retirement, it presents a range of tax strategies which we will be covering in Starts at Sixty next year.

Deeming rates likely to change in July 2024

While not guaranteed, the current “freezing” of the Centrelink deeming rates is set to end on July 1.This is a significant carry-over concession from the Covid Response and will impact tens of thousands of pensioners.

Currently, the lower deeming rate is set at 0.25 percent and the higher rate, at 2.25 percent.

We expect that these could increase to about 2 and 4 percent respectively.

Anyone, particularly singles, with financial assets over $300,000 and claiming a full or part pension will need to be aware of what’s coming.

Some of our modelling is showing that some pensioners could lose thousands a year in age pension payments.

Again in 2024, we’ll include some strategies that you can use to minimise or even negate the effects of the higher deeming rates.