Jack’s deeming rate dilemma

Jack wants to know which of his investments may be exempt from deeming rates.

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Q. Jack
Prior to 2015, if you are on a Centrelink payment (say disability support payment or Age Pension) are your investments not subject to deeming as they have been grandfathered? Is this correct?

A. The rule you are talking about applies to account-based pensions only. All your other investments will have deeming applied when the income test is being worked out.

The balance of an account-based pension is deemed under the income test for government income support payments (for example, the Age Pension or the Commonwealth Seniors Health Card).

If you have an account-based pension that was established before 1 January 2015 and you received and continued to receive your Centrelink payment from before that date, then the income test rules that applied on 31 December 2014 continue to apply.

The same rule applies for those that qualified for a Commonwealth Seniors Health Card before that date.

A more generous income test treatment applies to these investments, because the account-based pensions are grandfathered.

For the Age Pension (or disability support payment), a non-assessable (deductible amount) offsets the account-based pension income, reducing the amount of income that is counted in the income test.

The provisions for the Commonwealth Seniors Health Card is even more generous, with no income whatsoever counting towards the income test.

To continue to be assessed under the more generous pre-2015 provisions, you must maintain the grandfathered account-based pension (although you can reduce the balance by withdrawing lump sums when required) and you must continue to receive your income support payment.

If your payment stops for any reason, the grandfathering provisions are lost and the next time you are eligible you will be subject to the same income test as those now applying for the pension.

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Written by Ben

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