YOURLifeChoices subscriber Frank would like to treat his wife to an overseas trip, funded by a withdrawal from an allocated pension. Before he withdraws his cash, he would like to know how this lump sum is assessed by Centrelink.
My wife and I want to travel overseas and to enable us to do that, we would have to withdraw approximately $20,000 dollars from our allocated pension. Would this amount be assessed by Centrelink as income or are we entitled to withdraw without penalty?
A. Provided by Centrelink
If a lump sum is withdrawn from an allocated pension, (this is also known as a commutation), it is not assessed as income. Whether further assessment of the withdrawn amount occurs depends on what you do with it. For example, if the customer puts money in a bank account, the account balance is an asset subject to deeming. If the customer spends the withdrawn amount, no further assessment is necessary.
The commutation will however affect the income assessment of the allocated pension under the income test. This is because the deduction amount which reduces the amount of gross income assessed under the income test will change due to the reduction in the purchase price. Under the asset test, the asset value after the commutation is the new account balance.
For more information on income and asset tests for income streams, click the links below.