How is income from defined benefit pensions assessed?

Sue is seeking clarification on the assessment of income from a defined benefit pension.

Older woman holding a pen with her finger keeping place on a document

Sue has a defined benefit pension and is seeking clarification on how the stated deductible amount of 10 per cent is assessed in regards to the income test for the Age Pension.

Q. Sue
I have a query regarding income thresholds for defined benefit pension for Age Pension purposes. The recent change (1 January 2016) suggests that the deductible exemption is a maximum of 10 per cent of defined benefit pension income. It is not clear to me whether the current exemption of $164 per fortnight from any income is in addition to it. For example, if I have a defined benefit pension of $1200 per fortnight, then will my threshold be (a) $120 (10 per cent of 1200), (b) $120+$164, or (c)$164?

A. The 10 per cent exempt income is essentially in addition to the $164, however, 10 per cent is the maximum that can be exempt.

The assessable income of a defined benefit income stream is calculated by reducing the gross payment by the deductible amount. The deductible amount is equal to the tax-free component of the income stream under tax law as calculated by the superannuation fund. This is capped at 10 per cent of the gross payment for non-military defined benefit income streams.

Therefore, assuming your income stream is non-military, and it is subject to the maximum cap of 10 per cent, your deductible amount will be $120, leaving your assessable income as $1080. From this, $164 will be ‘excluded’ = $916. This will mean that your Age Pension is reduced by $458 - 50 cents for every dollar you exceed the threshold. 

If you have other assessable income, then the amount by which your Age Pension is reduced will increase.

It’s also worth noting that your eligibility for the Age Pension is assessed under the asset test and you are paid the lower amount that results from both assessments.

This information is general and you should consult with Centrelink regarding your own personal circumstances.



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    20th Feb 2017
    Another great decision from this federal government. My family lost $4000 per year because of this change. And I'm certainly not a fat cat! The statement by the minister representing Centrelink could only say that the people not receiving super pensions were being disadvantaged compare to people receiving super pensions. I paid into a super fund all my working life and this nitwit federal government changes the rules!

    20th Feb 2017
    in the answer above the comment is made"assuming your defined benefit is non/military. Is the military (DFRB/DFRDB) exempt?
    20th Feb 2017
    Yes. That is how I read it.
    20th Feb 2017
    Yes, that's correct and not wishing to denigrate the sacrifice ex military make, there was no reason to exempt military pensions except political
    20th Feb 2017
    In other words they are just making the figures up as they go along with no link to ant sort of reality.

    Thank goodness the ATO still acknowledge non concessional amounts as being the amount they actually are and not some manipulated figure to allow the government to betray workers yet again.
    20th Feb 2017
    I agree completely Rae
    20th Feb 2017
    I wrote to the Treasurer in 2015 complaining that Victorian State Super was a tax paid fund and that it was unfair that he could just cut the deductible figure in an arbitrarily fashion. State Super paid heaps to buy tax paid status when the Kennett government repaid the loans from State Super - rather than investing the funds. The response was from his office "...that it (my 34% deductible figure) was too generous !
    20th Feb 2017
    I'm really surprised there hasn't been a challenge in court over this. The government has fudged the figures and if it was taxed it would definitely amount to double taxation.

    All strategies that are undertaken to increase non concessional amounts become pointless once the deductible amount can be negated and declared to be some imaginary figure.
    20th Feb 2017
    It is also worth noting that defined benefit pensions are not classed as an asset. Therefore, you can have little in the way of assets but receive $80,000 pa defined benefit pension and still get a small part pension and pension card. There is talk of closing this perceived anomaly. However people do not realise that it is not a true Asset as you can't withdraw lump sums once in pension phase and there is no residual capital value to your estate.
    20th Feb 2017
    To Rosscoe, I also worked and saved all my working life to the extent that affected my health, then Hockey called disabled rorters and proceeded to smash the retirement plans of hundreds of thousands, whilst he himself rorted the travelling allowance to pay for a Canberra mansion that he openly boasted he and his wife obtained by lying and cheating. Now Turnbull and Bishop are giving $40mil to Pakistan and $25mil to Syria, muslim countries that hate us and want to behead us. After voting for the bastard Liberals for over 40 years I have now changed my vote to Pauline hanson.
    21st Feb 2017
    My next vote is for Pauline Hanson. Sick to death of these liberals.

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