Centrelink Deductible Amount Formula

When determining the entitlements that you are eligible for in relation to the Centrelink Age Pension and some other social security payments, you are assessed using either the ‘Income Test‘ or the ‘Assets Test‘.

Under the income test, some forms of income are favourably assessed for Income Test purposes.

In some cases, the income is not assessed at all.

Income from superannuation account based pensions commenced post 1 January 2015 may not be so lucky, as they will be deemed just like any other investment asset. More on this later.

Got a defined benefit pension? Click here for changes to Centrelink’s assessment of Defined Benefit Pensions as of 1 January 2016.

Income with favourable assessment

Certain income streams such as Allocated Pensions, Account Based Pensions, Market Linked Pensions and Annuities are favourably assessed.

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What makes the assessment favourable?

Income such as rental income from an investment property or work income is assessed at face value (i.e. the amount received is the amount assessed for Income Test purposes).

Other types of income is based on a deeming rate. For instance, if you have $50,000 invested in a bank account, it is not the interest received that is counted towards the Income Test, but rather the amount that this $50,000 is deemed to earn.

The higher level of income received may reduce the amount of social security entitlements that you are eligible for. Therefore, by reducing the amount that is assessed, the higher your potential benefits.

Assessment of Income Streams

Most types of income streams are favourable assessed as they include a Centrelink Deductible Amount. The Centrelink Deductible Amount Formula is detailed further below.



Centrelink Deductible Amount Formula

Allocated Pensions, Account Based Pensions, Lifetime Annuties and Market Linked Pension

Deductible Amount p.a. = (Original Pension Purchase Price less Any Commutations throughout the life of the pension) ÷ Relevant Number


Purchase Price = The lump sum amount that was initially used to commence the pension

Commutations = lump sum withdrawals made from the capital value of the pension (not pension payments) since commencement

Relevant Number = Life Expectancy factor based on Life Expectancy Tables

Related Posts:

Term Annuities

Deductible Amount p.a. = (Original Pension Purchase Price – Any Commutations throughout the life of the pension) ÷ Term of the Annuity

You can find more detailed information using the Guide to Social Security Law.

The Deductible Amount formula also applies to Non Commutable Account Based Pensions.


The Deductible Amount is the amount of your income stream that IS NOT assessed for Centrelink purposes.

The formula to determine the Deductible Amount varies depending on the type of income stream. Click here to access another article I have written regarding ‘Pension Grandfathering Rules’ which may provide a further insight into the Centrelink Deductible Amount Formula.

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Superannuation Account Based Pension Income Streams commenced post 1 January 2015 may no longer include a Deductible Amount. Instead, the pension balance is ‘deemed’ to earn an income, similar to superannuation accumulation accounts and most other investment assets.

To ensure an income stream is assessed under pre-1 January 2015 rules, it needs to be commenced prior to 1 January 2015 and the pension member must have been in receipt of a social security payment or allowance continuously since that date.

If the income stream is commenced prior to 1 January 2015, yet later fully commuted and re-commenced, it will fall under the post 1 January 2015 rules and no longer include a Deductible Amount.

Refer to your income stream Centrelink schedule to find all of the information you need to calculate your deductible amount.


The Centrelink deductible amount formula above is not used to determine the income assessment for defined benefit pensions. The assessable income of defined benefit pensions is calculated using the tax free component of the income stream, limited to 10% of gross income. Read more here.

A defined benefit pension is usually exempt for Centrelink asset test purposes.


Calculating the Deductible Amount of an income stream for Centrelink purposes using the Centrelink Deductible Amount Formula is a complex area – particularly with new income stream products entering the market all the time. A Centrelink Officer will provide you with an accurate calculation of your Deductible Amount based on your personal circumstances.

Chris Strano

Hi, I hope you enjoyed reading this article. If you want my team and I to help with your retirement planning, click here. If you prefer a DIY approach, then check out the SuperGuy HUB. Thanks for stopping by - Chris.

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  1. aw

    You Said. “To ensure your income stream is assessed under current rules, it needs to be commenced prior to 1 January 2015 and the pension member must be in receipt of a social security payment or particular concession card.”

    Two Q’s:
    1. I am retired(with 24k/per annum from an employer permanent invalidity super) and am 62 years of age SO, perhaps it is best I start an income stream from my private Super?? However, I am NOT be in receipt of any social security or concession card(except possibly being listed on my Wife’s temporary Heath care card)….does this matter?? Can I still start before 01 Jan 2015 and get the Centrelink deductible amt?

    2. ALL my contributions into my Super.pension account were AFTER tax(in fact savings that have already been taxed!) Does this make a difference? Or is the centrelink deductable only for any untaxed pension payments?? It seems unfair because, as said, I have already paid tax on these monies!


    • Chris Strano

      Hi aw

      Thank you for your questions. I have addressed these below:
      1. The proposed rules require you to have commenced the income stream prior to 1 Jan 2015 AND be a social security pension recipient or allowee immediately before 1 Jan 2015. You should check with a Centrelink officer on 13 23 00 if you are unsure about your situation.
      2. The tax components (pre-tax or post-tax contributions) that make up your superannuation balance are irrelevant for Centrelink assessment purposes. The Centrelink Deductible Amount formula is based on the purchase price of your income stream and life expectancy at commencement of the income stream – as detailed in the article above – and take into account gross payments received, less the deductible amount.

      Hope this has helped,

  2. Paul M

    Nice clear writing thanks. I was running an allocated pension with a managed fund and also an accumulation superannuation. I had drawn some pension and also made various commutations. At age 69 I have set up a Self Managed Super Fund and rolled both managed funds into it then added more non concessional contributions bringing the total to $410,000 and from there I have (with all the right documentations) resolved to pay myself a pension from the whole account. The calculation for the minimum is around $14,700 . However using the formula , and a fresh start , my number is 15.49 and hence deductible amount for Centrelink purpose calculates at $26,469 , which will suit me just fine as I need to draw that much anyway. Is it basically that simple or have I missed some trap or trick due to the previous (now rolled over) pension etc.
    If it is relevant, the components are 107769 concessional and $392,231 , Reminder I am 69 and applying for aged pension.

    • Chris Strano

      Hi Paul
      Thanks for your queries.
      Yes, assuming you commenced a brand new Account Based Pension after the consolidation with a sum of $410,000 and at age 69, your relevant number is 15.49 and your deductible amount is $26,469 p.a.
      Therefore, any pension payments received from this source up to $26,469 will not be assessable for Centrelink purposes.
      The previous (now non-existent) allocated pensions/accumulation accounts are irrelevant.Likewise, the tax components are irrelevant also.
      Do you realise the components add to $500,000 not $410,000? If your balance is now $500,000, I’m not sure how you have come up with a minimum pension income of $14,700.
      Your minimum, based on your age, should be 5% of your account balance on 1 July https://www.superguy.com.au/minimum-pension-payments/
      Please confirm your deductible amount with Centrlelink by providing them with your pension purchase price, any commutations and date of commencement to ensure they assess your situation accurately.

  3. Mike M

    I am trying to compare the pre Jan 2015 rules and the post Jan 2015 as to whether to set up an allocated pension now or after Jan 2015. My question is with the pre 2015 rules. Does the deductible amount stay the same for the full life of the Allocated Pension, in my case it works out to a bit over $21,000, and I’ll probably be under the assets test for the first few years and income test for the rest. If so and I index the amount of allocated Pension I’m drawing, the reduced Centrelink pension stays pretty much the same apart from a portion of the annual increases until my allocated pension runs out. From what I’ve worked out so far the post 2015 would give me a better outcome

    • Chris Strano

      Hi Mike
      Yes, the deductible amount stays the same for the life of the pension (unless you make a commutation, then deductible amount needs to be recalculated). Therefore the pre 2015 assessment may result in more and more of your income being assessable over time due to indexation of the income stream you receive and a static deductible amount. It is definitely possible that the post 2015 deeming assessment of your allocated pension would be more favourable. The comparison of the pre and post assessment is a case by case basis.

      • Mike M

        Thanks Chris, I’ll make up a spread sheet to do an accurate comparison over the time period.

  4. andrew urch

    I am currently drawing an ncap and intend to retire in February 2015 at age 63, commute my pension and leave my accumulation super account running until I turn 65 (my wife is receiving a dsp), because I already have the ncap in place will I still be entitled to the deductable ammount.

    • Chris Strano

      G’day Andrew
      To ensure your income stream is assessed under current (deductible amount) rules, it needs to be commenced prior to 1 January 2015 AND you must be in receipt of a social security payment or allowance. If you commute your pension in full (and commence a new one later), the new one will not be assessed under current rules. It will be deemed.

  5. Wayne Hummelstad

    Hi Chris,
    I understand that I can reduce my Relevant Number currently used by Centrelink simply by instructing the my SMSF Trustee to transfer the funds from my existing Account Based Pension into Accumulation on day 1 and then instructing the Trustee to start a new Account Based Pension from Accumulation on day 2. I then send Centrelink a completed “details of income stream product”. My first question is – is it that simple? and secondarily how do I make it clear to Centrelink that this is a new income stream and not one that is additional to the the one they currently have on their records.

    • Chris Strano

      Hi Wayne, quick answer – yes it is that simple. This is known as a pension ‘refresh’. You notify Centrelink that the old income stream no longer exists and a new one has commenced.

      2 main things to be mindful of:
      1. After 1 January 2015 once you commute a pension (refresh – roll back to accumulation phase), your new income stream will no longer include a deductible amount. It will be deemed, as you are effectively commencing a new pension. http://www.humanservices.gov.au/corporate/publications-and-resources/budget/1314/measures/older-australians/29-10728
      2. A pension refresh will not always increase the deductible amount. Let’s look at an example. If you originally commenced a pension at age 62 with a balance of $400,000, your deductible amount would be $19,083. If you refreshed your pension 4 years later, at a time when your balance was $300,000, your deductible amount would only be $16,891. In this instance it would have been better to not refresh your pension. However, if the balance was still $400,000 4 years later, the new deductible amount would be $22,522.

      You need to take into account your new balance as well as your current age. If there has been a decline in your balance, it may not be beneficial to refresh the pension.
      Hope this makes sense ?!?!

  6. John McLennan

    Two thirds of the assets of my SMSF are in my wife’s benefits (who is 10years younger than me). I can’t decide whether to commence an account based pension from 1st December, 2014 and be ‘grandfathered’. I receive a part pension and my benefits are approximately $250,000. I having difficulty in determining which is the best course of action – pre Jan 2015 or post Jan 2015. Is there a way I can determine this? I also have one further query. If I did start a pension and was ‘grandfathered’ but later decided to take a lump sum, would the pension be reassessed under the new Centrelink rules commencing on 1st January 2015? If this is so should I lower the starting pension amount and leave an amount in my accumulation account.

    • Chris Strano

      Hi John
      The immediate best course of action short term might be determining the annual income that would be assessable based on the ‘deductible amount’ approach compared to the ‘deeming’ approach (http://www.humanservices.gov.au/customer/enablers/deeming). The lower assessable income should provide higher Age Pension benefits if you are assessed under the Centrelink Income Test.

      The best course long term is harder to determine, as it is based on the income you will draw, the earnings/fluctuations of your account balance (for deeming purposes), changes in legislation/deeming rates, etc. At age 71 and purchase price of $250,000 you will have a deductible amount of $17,806. If you consistently draw an income below this amount, non of the income will be assessed.

      Partial commutations will reduce the deductible amount but I do not believe they will cause a pre-2015 pension to be assessed under the post 2015 rules, unless it is a full commutation.

  7. geoff mitchell

    Totally confused.
    My wife and I took out account based pensions on 1st July 2002. We are now both retired.
    My deductible amount is $29051.00 and my wife $11995.00. We are asset tested and our assets is now combined(self managed) at $945000.00.
    I take out $50,000 and my wife $30,000 a year but find that any variation to these figures causes our pension(small) to be stopped. What is the maximum we could take out each year without jepardising the pension

    • Chris Strano

      Hi Geoff

      I’m guessing that you must be borderline on Centrelink assessment between the asset test and income test. As you say, you are assessed under the assets test, but slight increases to your nominated income result in you losing the Age Pension, which likely means that you switch (from assets tested) to become income tested.

      Any amount above the deductible amount is fully assessable income.

      You can determine how close you are to exceeding the thresholds using the income and assets test here http://www.humanservices.gov.au/customer/services/centrelink/age-pension or the Centrelink rates estimator here https://www.centrelink.gov.au/RateEstimatorsWeb/cre.do

      You need to remember to include all other assets and sources of income, as well as your SMSF balance and pension payments.

      Alternatively, phone Centrelink 132300 and they are usually happy to run a ‘what if’ scenario based on your personal circumstance.

      Hope this helps

  8. Ken Wright

    Hi Chris. My wife and I currently have Low Income Health Care Cards, We don’t receive any Centrelink pension because we exceed the assets test We have two allocated pensions both in my wifes name , that were commenced in September 2012. We understand that under the new rules from 1st Jan 2015 affecting allocated pensions our account balances will be deemed to earn a certain income. because we believe that the new rules are not grandfatherd for Low Income Health Care Cards. Like they are for the Aged Pension and the Commonwealth Seniors Health Care Card.
    Questions. Do you know if Centre link count the annual pension drawdown ( less the deductable amount) as well as the deemed income for the income test. And for the deeming rate will they use ” Couple Non-Pensioner Allowees each person ,First $39,800 @ 2 %, and excess over this at 3.5%.”
    Because both Allocated Pensions are in my wifes name does this mean they wont count the deemed income when assessing my income, and I would retain the LIHCC, but will when assessing my wifes income and she would most likely loose her LIHCC. Hoping you can help.

    • Chris Strano

      Hi Ken
      This is a good question and one I am not 100% sure of. However, I have found a page on the human services website that explains the different types of income assessed for the LIHCC. It notes ‘deemed income’ and ‘income from income stream products’ as separate items, suggesting that the actual income you receive from your income streams is assessed, rather than the deemed income.

      Check it out here.http://www.humanservices.gov.au/customer/enablers/centrelink/low-income-health-care-card/income-test

      As far as who the income is applied against, I believe that your total combined income is divided by 2 – regardless of who the owner/recipient of income is.

      Given the recent changes to assessment of income streams, I think it would be safer to contact Centrelink.

      Sorry I couldn’t be of more help. I’d be interested to hear the outcome.


  9. Jeff Blanchard

    Hi Chris , Hope you are still monitoring this site
    I have a two person SMSF , drawing an account based pension , , and are also in receipt of a part age pension from centrelink , payable on assets test . My draw down is the 5% for my age . All grandfathered as I turned 65 two years ago .
    Due to my good equity investments and management , my purchase price of my income stream has now been exceeded by about $15000 . My question is , do you have any ideas as to how centrelink view this sought of occurance . Obviuosly the value of my shares do go up and down and can vary up to $10000 more or less per day . I hope that centrelink dont take the view that because i have exceeded the original amount , that the amount is reset and thus i loose the grandfather benefit
    Your help would be appreciated

    • Chris Strano

      Hi Jeff, the ‘purchase price of your income stream’ is different to the ‘current value of your income stream’. The purchase price is static.

      The 5% income will vary based based on the value at 1 July of each year which may cause you to draw a higher income and have more income assessable. You should update Centrelink on a regular basis with the ‘current value’ of your income stream – especially if you are assessed under the assets test.

      The current value of your income stream will not affect your deductible amount or grandfathered status.

      • Jeff Blanchard

        Thank you so much for answering my question . Very Helpful.
        The current climate and myths that these cigar smoking politicans are mouthing off about at the moment is quite upseting for people like me who have had Super account savings since 1972 and have done the right thing .This asumption that we all buy Landrovers , take Overseas cruises , have 20 million dollars homes and receive a part pension is NOT the norm.
        Thanks once again

  10. Jo

    Hi Chris,

    I also hope that you are still monitoring for conversation on this blog post! I have two queries (um, the first one has two parts) please.

    I have been trying to use the online Age Pension Calculator at http://yourpension.com.au/APCalc/index.html#CalcForm, which has been altered to include deeming on superannuation balances.

    However I am very confused about whether there is “double dipping” going on here – do I enter the pension account balance so that deeming is applied for income calculations AND ALSO enter the annual pension stream amount eg $10,000 per year or whatever?

    And if both are to be included, then should I use your above calculator to determine a deduction amount to reduce the income amount from the pension?

    When using the calculator, you start with the original balance, and then include any lump sum withdrawals. What happens after 15 years when your actual balance is perhaps halved due to the income drawn down from the pension account? Is this somehow built into the Age Factor value (or Relevant Number)?

    Mind you this last question is a moot point, if for pension accounts started after 1st Jan 2015, this calculation is not applicable!


    • Chris Strano

      Hi Jo!
      1. The calculator you are talking about does not cater for pre 1 Jan 2015 income streams. HOWEVER, if you do have a pre2015 income stream, you could add the value in, say, the investment property section and the assessable income (actual income less deductible amount) in the rent section as a work around. If you do this, you should not add anything in the ‘actual’ allocated pension section.
      2. If it is a post 2015 pension, add the value in the allocated pension section and it will automatically calculate deeming. Do not include actual income received anywhere.
      3. In relation to your last question, note the difference between ‘lump sum withdrawals’ and ‘income draw down’ in your question. These are two different things. Any income withdrawn (i.e. pension payments) will not affect the deductible amount calculation. Only if a commutation is made from the capital value of the income stream is the calculation altered. Commutations are very rare these days, as a person who has commenced a standard account based pension can generally take a pension payment of up to 100% of the balance, whereas pre-2007 income payments were limited and commutations were made to access capital.

      hope this has helped!

      • Jo

        Thank you very much for your answer.
        I think the pension calculator should make it clear on the final income screen that the income drawn from superannuation should not be included in the Pension Income field.

        With your help in getting it right, I’m now looking at a better result!

  11. Adam D

    Read your explanation with interest. To date I assumed that I am not eligible for Centrelink pension as I am 70 years old and get the defined benefit pension from my ex-employer of $37,617pa with the deductable proportion notified to Centrelink of 35.31%. In addition, I have SMSF from which I was required to draw $45,900 for the last year (not sure how this should be treated to calculate deductible amount). My wife is still working part time and earns about $25,000pa. Last October I got the Centrelink health card as I finished working on 30 June 2014. Your comments would be appreciated.
    Adam D

    • Chris Strano

      Hi Adam
      The annual deductible amount for your SMSF income stream will be calculated as: Original Purchase Price, minus any lump sum commutations, divided by your life expectancy at commencement of the income stream. The actual income that you withdraw is irrelevant in calculating the deductible amount – it is only relevant in calculating the ‘assessable’ income for Centrelink (i.e. the annual pension income that exceeds the annual deductible amount).
      If your wife is over age 65, her super/pension balance and any income will also be assessed in determining your eligibility for Age Pension.
      Hope this has helped.

  12. david Greatorex

    I have an allocated pension and income stream commenced before the January 2015 amendments. The allocated pension amount assessment comprises $200000 after tax contribution and $50000 salary sacrifice .The DA is 200000 divided by 18.54 life expectancy and the balance of income received is deemed under current rates. My question : Is there a strategy in varying the amount or frequency of income from such pension to achieve a better centrelink age pension income.? Many Thanks

    • Chris Strano

      Hi David
      I apologise for the very late reply. If your balance is $250,000 at commencement ($200,000 + $50,000), then it should be $250,000 divided by 18.54 in calculating the DA. Any income that you draw above the deductible amount ($13,484 p.a.) will be counted for Income test assessment (not deemed – deemed refers to a nominal interest amount applied to investments to be counted as income, rather than calculating the actual income.)
      There is no strategy as such for reducing the assessable income HOWEVER, if you are drawing a significantly higher income, say $35,000 p.a., it may be better to use your total pension balance to commence a brand new pension. If this was done the pension would be assessed under the post-Jan 2015 deeming rules which may result in less income being assessed. You need to be very careful with this, because closing down a pre-2015 pension cannot be reversed and you will lose the ‘grandfathered’ status of the pension. It is very important that you discuss your options with your accountant/adviser.

  13. Paul

    Are donations to charities a deductible for age pension as they are for income tax purposes?

    • Chris Strano

      This should be discussed with you accountant

  14. Paul

    As an age part pensioner with employer superannuation, my only taxable income is my age pension and a very small British pension. If my donations to charities could be used to offset this UK pension, presumably my Australian age pension would increase slightly. Does this help with a “yes” or “no” answer to my original question. Thank you.

    • Chris Strano

      Paul, this site is based on superannuation, not tax or social security. Also, your question confuses tax and age pension assessment.
      If you are wanting assistance with Age Pension questions, call 132300 (Older Australians – Centrelink).
      If you have tax questions, contact your accountant.
      Sorry I couldn’t assist further.

  15. Paul

    Many thanks, anyway.

  16. Margaret

    My husband is 68 and in receipt of an allocated pension drawing the minimum amount that commenced in December 2014 but has not been in receipt of a Centrelink pension. He will be applying for the aged pension in Oct/Nov will a partial commutation made prior to applying for the aged pension count towards the income test deeming rules.

    • Chris Strano

      Hi Margaret
      Provided this pension is not grandfathered under the old deductible amount rules, the way the deeming works is that Centrelink assume that pension & super balances and most non-super investments earn a particular rate of income (deemed income). The amount of ‘actual’ income or commutations is irrelevant. However, if the commutation is then, say, held in a personal bank account, it too will be deemed.
      First be sure to check that the income stream is not assessed under the pre-Jan 2015 rules. Generally, if was in receipt of any Centrelink payments and had commenced the income stream in Dec 2014, you may find the income stream won’t be deemed at all – instead the income will be and partial commutations will affect the assessment.

  17. Marina

    Hi Chris,
    My husband has an Alloc Pension started in 2013 from which we have been self supporting. He has now turned 65 and in the process of applying for age pension. As he was not in receipt of any Centrelink benefits ( other than a low income health card) prior to 1 January 2015, I am of the opinion that grandfathering of the deductible amount calculation will not apply. So for income purposes will the TOTAL annual drawdown of the allocated pension AND the deemed interest on the allocated pension balance, be assessed by Centrelink ? There is an online calculator that seems to suggest this is the case .I am confused slightly as it seems to be a double dip. A call to centrelink was unable to clarify clearly.

    • Chris Strano

      Hi Marina
      I am very sorry for the late reply. For some reason my comment notifications were turned off. You are correct , the deductible amount will not apply as he was not in receipt of a Centrelink payment on 1 Jan 2015. The actual drawdown income is not counted either. The only way this income stream is assessed under the income test is under the deeming provisions. The actual income withdrawn is irrelevant. See here for info on deeming http://www.humanservices.gov.au/customer/enablers/deeming

  18. Judy Bell

    I am thinking of withdrawing some money from my superannuation which is called flexi pension but I think it is an allocated pension. I heard from a friend that should i do so I will have no pension payment at all for that month as it is considered an income while another friend said it is calculated as saving in the bank and calculated by the deemed method. Your advice would be most appreciated.

    • Chris Strano

      Hi Judy
      There are a number of things to consider here.
      If this pension is assessed under the pre-Jan 2015 deductible amount method a withdrawal taken as an ‘increased pension payment’ may result in more of your income being assessable for Centrelink purposes. If the withdrawal is taken as a ‘commutation’ the deductible amount will be recalculated – potentially resulting in more income being assessable now and in future years, despite only withdrawing the same income as prior to the withdrawal. Any withdrawal amount that is not spent (i.e. held in bank accounts, etc.) will be assessed and deemed for Centrelink purposes.
      If your income stream is a ‘post-Jan 2015’ income stream, the total balance is deemed and the amount of income/withdrawals made are irrelevant for Centrelink assessment purposes.
      There is much to consider here when all you really want to do is a make a withdrawal!
      I would strongly suggest speaking to your adviser so that your withdrawal has minimal impact on your Centrelink entitlements. If you don’t have an adviser, feel free to send me an email [email protected] and I might be able to point you in the right direction.

  19. BB

    I commenced a ‘Market Linked’ income stream on 30th June, 2007 at age 74 (Relevant Number = 11.5 – in keeping with the Social Security Law return of capital rule Table of Life Expectancy) with an original purchase price of $108,018 and no residual capital value and an ‘Account Based, income stream on 1st July, 2008 at age 75 (Relevant Number = 10.9 – in keeping with the return of capital rule Table of Life Expectancy) with original purchase price of $330,513.42 and no residual capital value. Total income stream pensions received for the last financial year to 30th June, 2015 were $6,669 and $22,606.50 respectively = $29,275.50 in total with no commutations. Additionally I earn $6,000p.a. which is below the Social Security (Work Bonus) Law allowance limit of $6500 p.a. and therefore not assessable.
    My wife aged 80 years also earns $6,000 p.a. with no other income.
    My estimation of assessable income in determining our aged pension entitlements (in keeping with Social Security Law rules and respectively) under the income test using the formula:–
    Assessable Income = Annual payment – Deduction Amount (Purchase Price / Relevant Number) is :-
    Market Linked = $6,669 – ($108,018 / 11.5) = $6,669 – $9,392.87 = -$2,723
    Account Based = $22,606.50 – ($330,513 / 10.9) = $22,606.50 – $30,322.33 = -$7,716
    My estimate indicates that a full combined aged pension is payable under the income test as we have negative assessable income. This is significantly different from Centrelink’s estimation which has assessed an income of +$18,000 p.a. and a combined aged pension entitlement of about $25,000 p.a. i.e. about $8,000 less than full pension.
    Is my estimate correct? If not where have I failed? I would be very grateful if you could spare some time to look at my problem.
    Kindest Regards,

    • Chris Strano

      Hi BB
      A few things possibly need to be considered:
      1. Has there been any commutations (i.e. lump sum withdrawals from the capital of the pensions since inception). If so, it will affect the deductible amount DA = (purchase price-commuatations-RCV) / relevant number.
      2. In order for the deductible amount to apply for Centrelink assessment purposes, the following conditions must be met: The pension must have commenced prior to 1 January 2015 AND you must have been in receipt of a Centrelink payment on 1 January 2015 – both of these conditions must be continuous. Once a pension stops, or you become ineligible for Centrelink payments, the deductible amount will no longer apply; instead your income streams will be assessed under the ordinary ‘deeming’ provisions.
      3. If you have other financial assets, the other assets will be deemed to earn an income,or you may have rental income, which may increase the amount of income assessed for Centrelink purposes
      4. Centrelink apply an ‘income test’ and an ‘assets test’. Whichever test results in the lower Age Pension entitlement is the one applied. So, if you are assessed under the assets test, all income is irrelevant until you potentially become assessed under the income test instead, due to possibly a reduction in asset base.
      5. The assessment if your pension income does not fall below zero (i.e. the -$2,723 and -$7,716 should both be $0. These negative amounts cannot be used to offset other assessable income. The deductible amount is pension income specific.

      If none of the above points explain why you are not receiving the Age Pension that you are entitled to, then I would suggest returning to Centrelink and ensuring that they are assessing your income streams accurately. It is not uncommon for Centrelink staff to ‘deem’ an income stream, as per the new rules, rather than have it assessed under the grandfathered deductible amount provisions.
      Hope this helps.
      Let me know the outcome.

  20. Peter morris

    Hi Chris
    I have 300000 in total assets including 290000 in smsf in the bank. My deductible amount is 16000.
    I commenced my pension and smsf may 2012 and am grandfathered and asset tested. I will drawn 18000 by years end including a commutation of 5000 and extrapension of 7000 .i am therefore going to draw 2000 more than my deductible amount. Will it affect my pension this year? Especially if i take 2000 extra pension next month.

    • Chris Strano

      Hi Peter, thanks for the question. If you were drawing $18,000 in pension payments, then yes, you would be correct and the excess $2,000 would be assessable income for social security purposes. Whether it affects your pension entitlement or not, I am unsure, because I do not know whether you are assessed under the assets test or income test and do not know your other sources of income. However, we need to rewind a moment, because you mentioned commutation. A commutation is not a pension payment. By making a commutation (as opposed to simply an increased pension payment) you are changing your deductible amount immediately from the day you make the commutation. See the formula: DA = (Original Purchase Price – Commutations)/RN. Therefore, after making the commutation, you need to recalculate your deductible amount. You should also request a Centrelink Schedule from your superannuation provider and send it to Centrelink immediately.

  21. Jamie

    Hi Chris, I’ve been stuck on this problem for ages and cannot seem to calculate the correct amount.
    Donald, aged 71 commenced an account based pension in July 2007 with $350,000. The balance is currently $300,000. (I assume a commutation has been made) $100,000 is tax free and $200,000 is the taxed element of the taxable component.

    • Jamie

      He receives $12,000 p.a from the account based pension. How much is assessed under the income test? His life expectancy is 18.54.

      The DA I would calculate as
      300,000/18.54 = 16,181.23

      But if you minus this from the yearly income of $12,000, nothing remains.

      Please help

      • Jamie

        If that is the correct calculations, does that mean ‘nil’ is assessed under the income test?

        Because it was set up in July 2007, it is also entitled to a 50% asset test exemption. So does that mean the $300,000 would drop to $150,000?

        As you can see I’m very confused

        • Chris Strano

          If it is a complying pension and eligible for a 50% asset test exemption, then yes, only half of the current balance is assessable.

      • Chris Strano

        The calculation is correct, but you need to use starting balance of $350,000 – not current balance. Also, make sure you are using correct life expectancy figures.

        If nothing remains, then yes, nothing is assessed.

    • Chris Strano

      Hi Jamie,
      Don’t assume a commutation has been made unless you specifically know this. The balance has probably reduced because pension payments have been made and/or earnings have reduced the balance. The taxable components of the balance are irrelevant when calculating the deductible amount

  22. phonse

    Hi Chris. I have a pre Jan 2015 Allocated pension .I drawdown every 3 months[approx $5000 ] Do I need to adjust the balance in my online centrelink a/c every 3 months or just let centrelink use the annual Account Based Pension Assessment form that gets sent to them by my fund @ the end of each Financial year. Thanks. Phonse.

    • Chris Strano

      Hi Phonse, if the assessment form includes all of the relevant information, such as commencement date, purchase price, relevant number, pension income being received for the year, current balance and any commutations, then this will be fine (this form is sometimes also referred to as a Centrelink Schedule). You will however need to update them immediately if you decide to increase or decrease your regular income amounts or make a one-off lump sum withdrawal. Also, you should update them as the balance changes if they do not receive this information automatically – if it decreases it may lead to more entitlements throughout the year.

      • phonse

        Thanks Chris. I only get income [interest] once a year in july. Do I need to tell Centrelink the amount ? as it averages out over 12 months.Hence X amount in, X amount out. Therefore no correspondence to centrelink required. Thanks. Phonse.

        • Chris Strano

          The amount of pension payments will be included on the Centrelink schedule regardless of when the actual are received.

  23. phonse

    HI Chris. My allocated pension payment per year is $20000,but I need to take an extra $2000 this financial year .I am under the Grandfathered rules.My other income is way below the taxation t/hold.Will my Centrlink pension be effected by this extra @2000?

    • Chris Strano

      Hi Phonse, it will depend on whether the additional $2,000 exceeds the annual deductible amount and if you are caught under the income test. For example, if your annual deductible amount is, say, $24,000 and you increase this year’s payment from $20,000 to $22,000, then it should have no affect. If you are already over the dedcutible amount, or if the additional $2,000 will cause you to be, then it may affect payments if you are assessed under the income test. If you are assessed under the assets test, it may not affect payments, unless the additional $2,000 causes your assessment to switch from the assets test to the income test. I would suggest running this by a Centrelink officer and then can tell you the affect that it would have.

  24. Greg

    Hi Chris
    What is the “Date of Purchase” of an Account Based Pension? I started a Transition To Retirement pension from my new SMSF (rolled over from employment super) in 2005 while continuing to work part time until 2012 when i retired and started a part-pension. I used the 2005 date on the Centrelink/DVA Schedule. Should I have used the 2012 time? Also my wife became a Reversionary Beneficiary in 2015 so should be included in the Relevant Number years. What combination of her and my years should be applied?

    • Chris Strano

      Hi Greg,
      The date of purchase is the date the account based pension started.
      I’m not sure I follow correctly. I think you said you rolled over your super in 2005, but I’m not sure when you started the TTR Pension. I don’t think it could’ve been 2005, becuase TTR Pensions only came into existence in 2007. When you say part-pension, did you mean you used part of your super to start a pension?
      In any case, the start date should be the date the pension commenced, not the rollover date. However, the only way your wife could have become a reversionary beneficiary would have been for the income stream to stop, rollback to accumulation phase and then recommence a new income stream with her as the reversionary beneficiary. Therefore, the ‘date of purchase’ would be 2015. If it was on or after 1 Jan 2015, the relevant number, purchase price, etc. is irrelevant for Centrelink purposes, because the income stream is no longer a grandfathered income stream as becomes a deemed asset instead for Income Test purposes.
      It is very important the SMSF documentation, including minutes, are up-to-date and consistent with the activities/intentions of the Fund and its members to avoid penalty.
      Related Posts
      What is A Grandfathered Pension
      Pension Grandfathering Rules
      Centrelink Schedule Example
      Reversionary Pension Beneficiary


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