Q: Can you please confirm whether the assets held in a superannuation fund count towards the Centrelink assets test and income test?
A: I can provide you with an overview of how superannuation benefits are treated by Centrelink for the purposes of the Age Pension rules, although you’ll need to check with Centrelink about your personal situation, and how your super benefits are specifically affected.
You must satisfy both an income test and an assets test to become an Age Pensioner, and the test that gives you the lowest amount of Age Pension is the test that prevails.
If you’re under Age Pension age…
If you’re under Age Pension age (currently 65, and eventually rising to 67 year for those born after a certain date), superannuation benefits generally do not count towards the Centrelink assets test or income test. If an individual is under Age Pension age, and is not yet drawing on their super benefits, then those super benefits are not assessed under the Centrelink income and assets test for government benefits. I explain the Age Pension age rules in more detail in the SuperGuide article Age Pension age increasing to 67 years (not 70 years).
If you’re under Age Pension age and receiving super benefits
Super benefits do count however when assessing eligibility for the Age Pension if your super account is in pension phase and you’re receiving pension payments from your super fund, even when you’re under Age Pension age. This distinction is important where you have one member of a couple receiving the Age Pension, and the other member of the couple starts an income stream (pension) from their super fund. The super assets are counted for the Centrelink assets test. Depending on when the super pension was started, or when Centrelink benefits were first received, the super pension assets may also be subject to deeming for the purposes of the Centrelink income test. For more information on how superannuation pension assets and pension payments are treated under the Centrelink income test see SuperGuide article New income test rules mean less Age Pension.
If you’re over Age Pension age and not yet started receiving super benefits…
If you have reached Age Pension age, and not yet started an income stream (pension) from your super fund, your super account IS counted as an asset towards the assets test.
For the purposes of the income test, the super account, which remains in accumulation phase beyond Age Pension age, is treated as a financial investment and is subject to the deeming rules, which means a certain rate of return is assumed on your super account regardless of what that super account actually earns for the year. I explain the deeming rules in the SuperGuide article Age Pension income test: Deeming rates and deeming thresholds, and the new rules applying to super pensions under the Age Pension income test in the SuperGuide article New income test rules mean less Age Pension.
If you’re over Age Pension age and receiving super benefits
If you have reached Age Pension age, a super pension is counted for the Age Pension assets test, and how your super pension is treated for the Age Pension income test depends on when you started claiming the Age Pension, and when you started your super pension.
Note: If you are running an older allocated pension, or the newer account-based pension, then all of the account balance counts towards the Age Pension assets test. If you have an older complying pension or term allocated pension, then you may not have to count any of your pension assets as part of the asset test, or perhaps only half of the assets.
Income test: Started a super pension BEFORE January 2015, and started claiming the Age Pension BEFORE January 2015: For the purposes of the Age Pension income test, the income that is counted is generally the pension payments received for the year less a deduction amount. The deduction amount represents a return of some of your original capital.
Income test: Started a super pension and/or started claiming the Age Pension ON OR AFTER 1 January 2015: The superannuation pension is subject to the deeming rules, which means a deeming rate is applied to the value of the pension assets, and this notional income is assessed against the Age Pension income test. The pension payments, and whether the payments include a return of capital, are not considered under the new rules. For more information on the new treatment of super pensions under the Age Pension income test see SuperGuide article New income test rules mean less Age Pension.
Background: Age Pension rules
An individual must satisfy both the Age Pension income test and the Age Pension assets test to be eligible for a full or part Age Pension. For more information on the Age Pension see the following SuperGuide articles:
- Age Pension: More Australians entitled since September 2016, but lose from January 2017
- Age Pension: September 2016 rates now apply (until March 2017)
- Age Pension: Income test thresholds applicable since September 2016
- Age Pension: Assets test thresholds applicable since September 2016
- Take note: Age Pension age increasing to 67 years (not 70 years)
- Age Pension: Does my superannuation lump sum count for income test?
- Age Pension income test: Deeming rates and deeming thresholds