Chalmers backs Age Pension Cgt Exemption from July 1, 2027
Jim Chalmers said recipients of certain government payments, including the Age Pension, will be covered by the age pension cgt exemption when the new 30 per cent minimum capital gains tax rate starts on July 1, 2027. The change means age pension recipients will not face that minimum rate on real capital gains accrued from that date.
The Treasurer said, “The minimum tax reduces the incentive to defer realising capital gains until marginal tax rates are low, and better aligns the tax rate on gains with the tax rates paid by most workers.” He also said, “Recipients of certain government payments, such as the Age Pension and JobSeeker, will be exempted from the minimum tax.”
Jim Chalmers on the tax change
The government said the exemption was included for income support recipients so the most vulnerable people on low income and with low wealth are not disadvantaged. Under the new rules, income support recipients would still be taxed on any capital gain at their marginal tax rate after the new inflation-adjusted CGT discount is taken into account.
That leaves a clear split in the rules. Age pension recipients avoid the 30 per cent minimum CGT tax, while other sellers can still face that floor on real gains after July 1, 2027.
Age Pension and part-pensioners
About 2.67 million Australians receive the age pension, and about 860,000 of them are part-pensioners. Even someone who receives just $1 worth of age pension benefits could avoid the new tax hike under the exemption.
To qualify for the age pension, a person must be 67, be an Australian resident and pass income and assets tests. The income cut-off is $2,619.80 per fortnight for singles and $4,000.80 per fortnight for couples.
Retiree tax choices
The assets cut-off is $722,000 for single homeowners and $1,085,000 for couple homeowners. For single non-homeowners, it is $980,000, and for couple non-homeowners it is $1,343,000. The family home is not counted in the assets test.
Emma Burckhardt of Perks Private Wealth said advisers would not chase the age pension at the expense of long-term wealth, but would look more closely for clients near the borderline. She said, “The policy creates a sharp divide with self-funded retirees facing a minimum 30 per cent tax on capital gains regardless of their marginal rate, while age pension recipients are exempted from the minimum tax.”
The practical pressure point is the border between part-pension status and self-funded retirement. For Australians close to the income and asset thresholds, the exemption gives a reason to check entitlement before selling an asset that could trigger a capital gain.
