Understanding whether your super is assessed as income or an asset is vital.
Along with personal savings and superannuation, the Age Pension completes the three pillars of Australia’s retirement income system. Therefore, it’s important to understand how super is assessed when applying for the Age Pension.
When you first apply for the Age Pension, you will be assessed under both the asset and income tests. Your entitlement will be assessed according to the test that produces the lower payment. For example, if, under the asset test, you are assessed as receiving a fortnightly payment of $400, but under the income test you would only receive $380, then you will be paid under the income test, and subjected to the associated rules.
How are your super investments assessed for the Age Pension?
As you will have to reach Age Pension age to apply for this government benefit, your super will be assessed under both the income and asset tests. You can start your claim 13 weeks prior to when you will reach Age Pension age.
If you have not yet converted your super into a retirement income account (account-based pension) your super balance will be counted as an asset. Under the income test, your super balance will have deeming rates applied to it in order to calculate an assumed rate of return.
If you have opened a retirement income account and are receiving an income stream from your super, then the date you commenced your income stream will determine how it is assessed.
Under the asset test, retirement income accounts that commenced prior to 20 September 2007 may be fully asset test exempt or partially assets test exempt. All retirement income accounts commenced after 20 September 2007 will be fully assessable.
Some people may also have fixed term or lifetime annuities. You will know if you have one as these income streams as they provide a guaranteed income and you generally cannot access the balance without closing the entire account. These income streams will have a pre-determined Centrelink schedule for the duration of the annuity which details what the assessable asset value and assessable income value will be each year.
Under the income test, all income streams commenced from 1 January 2015 are subjected to deeming rules and the notional income is then assessed. For those who have continuously received a Centrelink income support payment (such as Newstart Allowance, Disability or the Age Pension) and also commenced an income stream prior to 1 January 2015, the retirement income account is not deemed and only part of the income received is assessed under the income test.
What about my partner’s super?
If you are considered by Centrelink to be in a relationship, either married, de facto or same-sex, then you will be assessed as part of a couple. Your partner’s super may be assessed depending upon their age and whether they are still contributing to super, or are receiving an income stream from a retirement income account.
If your partner is under Age Pension age and has not commenced an income stream, then his or her super will not be assessed as part of your Age Pension claim.
However, if your partner has reached Age Pension age, or has commenced an income stream, then his or her super will be assessed by the same means explained above.
Of course, super is only one aspect of what is assessed when claiming an Age Pension. Other assets that you hold and income that you receive will determine whether you receive an Age Pension, and if so, how much.
This article has been sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898. The views expressed are those of YourLifeChoices and not AustralianSuper. For more information about AustralianSuper, please visit australiansuper.com/assetchanges
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