How will a super lump sum affect Centrelink payments?

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Hazel wants to take a lump sum out of her super but is worried about her payments.


Q. Hazel
I am 65 years old and retirement age for me is in 12 months’ time. I am part of a couple and my husband already collects the Age Pension. I no longer work, but fulfil my obligations to Centrelink 30 hours a fortnight and collect a Newstart payment. I have a super fund and pension consolidator fund in which I stream four per cent per annum. Can I access more from my super fund in a lump sum, not to buy assets but to make our living more comfortable and affordable? Is there a restriction on how much I can take and would this affect my husband’s pension or my Newstart payment?

Also, my husband would like to go travelling for 12 months from the middle of next year. Would I need to be in Australia to apply for my Age Pension? I meet all the criteria as I have resided in Australia for the past 50 years, becoming an Australian citizen, and have worked for 40 of those 50 years.

A. Taking a one-off amount of superannuation is exempt from the income test, but what you do with the lump sum may affect you under the income or assets test. It doesn’t matter if the lump sum is exempt.

If you spend the money on an exempt asset it won’t affect you under the assets test. This includes your principal home, mortgage, or medical equipment.

If you buy a non-financial asset it will count in the assets test. This includes things such as artwork or a holiday home. If you buy or add to your financial assets Centrelink will use deeming rules to work out income from your financial assets. This applies if you use the lump sum you get to buy or add to financial assets. The deemed income counts in the income test. The assets may also count in the assets test.

Deeming rules lump sums will count in the income test if you’re:

  • putting the money in the bank
  • lending it
  • using it to buy securities or investments.

While you meet all the requirements for Age Pension eligibility next year, on the day you claim the Age Pension, generally, you must be an Australian resident and in Australia.

In this situation it is probably best to schedule your holiday around your Age Pension application.

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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

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Written by Ben


Total Comments: 5
  1. 0

    We have lived and worked in Australia for about 40 years ,my husband had worked for 13 years in the UK where we came from, as my husband was about to turn 65 we had a phone call in the middle of the night explaining because he was of entitled to the basic UK age pension. All we had to do was give them a bank account to pay his pension into. I get a pension of my own from them but not a full one I didn’t work 10 years there. Wouldn’t it be nice if our centre link did the same here, here we have to practically beg for everything.

    • 0

      Yes, when I retired at 73, after working here for 35 years, I was already receiving my UK pension since I was 70, Centrelink are of course aware of it and reduced my Oz pension accordingly, but they don’t hassle or harangue me, never have to report everything I earn, don’t check on every dollar my Wife earns etc, all in all, treats me with respect..which is sadly lacking with our system…

    • 0

      All the other OECD countries do this and have universal pensions. Between Labor hating anyone who accumulates any savings or investments at all and the LNP hating workers it seems we are stuck in the middle of a no win situation here.

    • 0

      That’s because of the trickle down effect in Australia, Jem. Politicians, media, etc always state that the ageing population is a worry to government, is a burden on taxpayers, is overtaxing the health system… However, the ageing population on other types of pensions, considered a right, eg ex politicians, ex teachers, ex nurses, etc are not considered a burden because they are not at the mercy of government parsimony and therefore not treated like the beggar at the gate.
      As has been said before, a universal pension is a necessity so that everyone is treated equally.

  2. 0

    Hazel – PLEASE – be VERY careful, as I have been through almost same situation! And I got shafted.
    I was pushed out of my job 10 month before I was eligible for the Aged Pension. Still with a mortgage, I thought I would cover myself, so took a lump sum out of my super and put it into my home loan account, to cover my mortgage payments. I then needed to go on Newstart so applied. Was declined – why? – because I had too much money in my bank account.
    BIG mistake! Money in super – before you go on Aged Pension – cannot be assessed when applying for Newstart. BUT because I had some money in my redraw (mortgage account) – no sorry, I wasn’t eligible for a cent of Newstart. Instead of taking out a lump sum, I should have just taken out an amount each month to pay the mortgage. I appealed, saying it could be seen that the money had come from my super account, but lost because they don’t care where the money has come from, just that it is in my bank account.
    So I urge you – be VERY careful what you do.



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