From 1 January 2015, new Centrelink/DVA rules will come into effect, meaning account-based pensions commenced on or after this date will be deemed under the income test. Those commenced before 1 January 2015 will also be deemed unless grandfathering rules are met to retain the current, generally more beneficial, non-assessable portion income test.
Recipients of Centrelink benefits and allowances have recently received a letter from Centrelink highlighting these changes. Queries we have received from clients have indicated to us that the letter sent by the Government is not totally clear on who is impacted by these changes.
Will you be impacted by the change in rules?
|hold a Low Income Health Care Card||New rules – The deemed income from your account-based income stream product will be used to assess your entitlement|
|are a self funded retiree and receive aged care||New rules – The deemed income from your account-based income stream product will be used to assess your aged care fees|
|are receiving an income support payment, pension or allowance, and already hold an account-based income stream product on 31 December 2014||Old rules – No change for the products you already hold on 31 December 2014. The deemed income from any new products you purchase from 1 January 2015 will be used to assess your entitlement.|
|begin or resume receiving income support from 1 January 2015||New rules – Your account-based income stream products will be assessed under the new rules, even if you were previously assessed under old rules|
|are receiving an income support payment, pension or allowance and change or buy a new account-based income stream product from 1 January 2015||New rules – Your account-based income stream products will be assessed under the new rules, even if you were previously assessed under old rules|
|have a partner who holds a superannuation account-based income stream product and they are not receiving income support payments||New rules – The deeming rules will apply to their product and be used when calculating your entitlement. This may affect your payments or your aged care fees|
How will you be affected?
If you will be affected by this new rule, your superannuation accounts (accumulation and pension) will be treated as a ‘financial assets’ and will be assumed to earn a set return (i.e. deemed).
Financial assets include: cash, listed securities, managed funds, insurance bonds, loans, gifts (above limits) and superannuation accumulation where age pension age or older. All of these assets are deemed at the rates below:
Current deeming rates and thresholds
|Scenario||Current Threshold||Deeming Rates|
|Single pensioner or allowee||First $48,000|
Excess over $48,000
|Partnered pensioner couple (combined)||First $79,600|
Excess over $79,600
|Couple non-pensioner allowees (each)||First $39,800|
Excess over $39,800
If my circumstances suit, should I commence an account-based pension before 1 January 2015?
Each individual’s situation is different. There is no ‘rule of thumb’ where we can easily state which is the best option. An analysis of a person’s income needs, Centrelink benefits, other assets and age needs to be evaluated to best determine a favorable outcome.
“This document or website contains general advice only. You need to consider with your financial planner, your investment objectives, financial situation and your particular needs prior to making an investment decision. Charter Financial Planning Limited and its authorised representatives do not accept any liability for any errors or omissions of information supplied in this document except for liability under statute which cannot be excluded.”