Well, the time has come and gone for the good old deductible amount (or has it?… read on….).
Here’s what you need to know.
Find out more about Centrelink’s assessment of Defined Benefit Income Streams here.
What did I miss out on?
In order to have your income stream assessed using the Centrelink Deductible Amount Formula, it needed to have been commenced prior to 1 January 2015 and you had to be in receipt of a Centrelink payment prior to 1 January 2015.
How are future Account Based (Allocated) Pensions assessed for Centrelink post 1 January 2015?
From now on, if you commence an Account Based Pension using your superannuation savings, the balance will be assessed using the Centrelink ‘Deeming’ provisions. The income stream will not include a deductible amount for Age Pension purposes.
E.g. If you are a single male aged 65 and commence an Account Based Pension on 1 February 2015 for $500,000, it will be deemed to earn $16,780 p.a. for Centrelink purposes – irrelevant of the actual income you are receiving. (this assumes you have no other financial assets. All financial assets are lumped together and deemed)
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Had you commenced this same income stream on 1 December 2014 and were 65 in receipt of the Age Pension, you would have been able to draw an income of $26,968 p.a. from the pension without it being assessed and only the amount drawn above this would be assessed.
What are the Centrelink Deeming Rates for Account Based Pensions and other Financial Investments?
As at 1 January 2015:
Singles:
First $48,000 is deemed to earn 2.0%. Any balance above $48,000 is deemed to earn 3.5%
Member of a Couple:
If at least one member is receiving a pension, the first $79,600 is deemed to earn 2%. Any balance above is deemed to earn 3.5%
If neither of you receive a pension, the first $39,800 for your (and your share of joint owned financial assets) is deemed to earn 2%. Any balance above is deemed to earn 3.5%.
Is there anything I can do to have my income stream assessed under the Centrelink deeming provisions?
If you have an industry, retail or superannuation account, there is nothing that you can do. Any Account Based Pension commenced from now on will be deemed.
If you have a SMSF, you should check with your adviser / accountant / SMSF administrator to confirm whether you commenced an income stream between 1 July 2014 – 31 December 2014. Check the pension ‘minutes’ and other documentation to review any relevant dates.
An alternative may be to consider whether an annuity would suit your personal circumstances. Annuity investments may still include a deductible amount. Speak to an adviser.
Defined Benefit Income Stream Assessment for Centrelink Purposes
A schedule or statement from your defined benefit provider will detail the tax free component of the income, which is used in calculating the deductible amount.
Chris Strano
Chris Strano created SuperGuy to help the average punter navigate through the complex and ever-changing super rules. It has since become one of Australia's leading digital super resources. If you’re looking for more personalised advice, have a chat with one of our experts at www.superguy.com.au/need-advice
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Hi Chris, just a short question about deeming rules from 1JAN2015.
I have SMSF and can commence my account base pension from the date of 1JUL2014. If I register for Age Pension with Centerlink (say this week) what rules will apply for me? Before or after 1JAN2015? Born 10JUL1949. And another question about Centerlink Schedule – can it be prepare by myself as I am SMSF trustee?
Thanks, Stefan
G’day Stefan! You need to have been in receipt of a social security payment on 1 Jan 2015 in order to qualify for the grandfathering rules of the deductible amount. You will therefore be classified under the new deeming rules.
In regard to the Centrelink Schedule, I don’t believe that this is a formal document. It is simply produced by super funds to assist members with disclosing accurate information to organisations. If you are applying for the Age Pension, I’m pretty sure that you can just fill in the relevant information on the application form – you should not need a Centrelink schedule. If for some reason you do need one, I don’t see any harm in producing one yourself, but it might be an idea to get your accountant/SMSF administrator to run their eye over it.
Hope this helps!
Chris