Q: Can you please confirm whether the assets held in a superannuation fund count towards the Centrelink asset test/income test?
A: I can provide you with an overview of how superannuation benefits are treated by Centrelink, 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 for men and at least 64.5 for women), superannuation benefits generally do not count towards the Centrelink assets test or income test. If an individual is under Age Pension age and not yet drawing on their super benefits, then those super benefits are not assessed under the income and assets test for government benefits. I explain the Age Pension age rules in more detail in the article Take note: Age Pension age increasing to 67 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.
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, the rules change again: your super account IS counted as an asset towards the assets test.
For the purposes of the income test, the super account 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 my article Age Pension: Deemed income may rise (or fall) with interest rates.
If you’re over Age Pension age and receiving super benefits
If you have reached Age Pension age, and you have started taking an income stream/pension from your super fund, then how your income stream is treated depends on what type of pension that you run from your fund.
If you are running an older allocated pension, or the newer account-based pension, then all of the account balance counts towards the 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.
If you have started taking an income stream from your super fund, for the purposes of the income test, the income that is counted is generally the pension payments received for the year less a deduction amount. You can find more information on how income streams/pensions are assessed for the Centrelink assets and income test on the Department of Human Services website, by visiting the ‘income’ page , although the revamped DHS website is a bit light on in relation to information about how superannuation pensions are treated when claiming the Age Pension.
Tax-free super still counts for Age Pension but not for CSHC
Although super benefits may be tax-free on or after the age of 60 (except for some public servants), such benefits still count when assessing whether a person is eligible for the Age Pension test.
I also want to flag the confusion from some readers regarding eligibility for the Age Pension, compared with eligibility for the Commonwealth Seniors Health Card (CSHC). The income test for the Age Pension is different from the income test for assessing eligibility for the CSHC. The CSHC is available for senior Australians who aren’t eligible for the Age Pension, and CSHC eligibility is based on a person’s ‘adjusted taxable income’ while the Age Pension income test is based on a special composite of income sources known as ‘income amount’.
Understanding this difference is important because the tax-free income (for over-60s) from super pensions doesn’t count when assessing eligibility for the CSHC (see my article Are you eligible for a Commonwealth Seniors Health Card?), but pension income usually counts when determining eligibility for the Age Pension.