Age Pension and Assessing Super Income

The means test that most affects Age Pensioners is the Income Test. With 22% of Age Pensioners assessed under the Income Test, careful consideration should be given when making changes with account-based pensions commenced pre- 1 January 2015. Provided the pension member has been in continuous receipt of social security payments since that date, they are likely subject to ‘grandfathered’ income assessment for Centrelink purposes.


For grandfathered pensions, Centrelink will calculate a deductible amount that effectively offsets the actual annual income received from an individual’s account-based pension. This is in contrast to the current assessment of income streams, which are now deemed.


The deductible amount can be quite beneficial to clients, even to the point of cancelling out all the income assessment for the pension member.


For example, Age Pension recipient, Evelyn commenced an account-based pension in 2014 with current value of $400,000.

  • Her relevant number at commencement (based on life expectancy) is 16.99 and over the years she has drawn lump sums amounting to $15,000 in addition to her pension payments. Evelyn’s deductible amount is therefore $22,072.

  • Drawing an actual pension income of $20,000 p.a. from her account, none of Evelyn’s income is assessed for Centrelink purposes.

  • If Evelyn changed her super pension provider, her income assessment increases to over $7,500 per annum under the deemed rules.

To manage your super pension deductible amount, Centrelink will need updates of changes to pension payments or lump sum withdrawals as these will impact their assessment of your income. A change to a pension payment will impact for your assessment for the financial year, whereas a lump sum withdrawal will impact the deductible amount calculation on an ongoing basis.


The deductible amount calculation will switch over to a deeming calculation upon rollover to another product, or in the event of a pension re-commencement (refresh). In these cases, the grandfathered assessment will be lost forever.


It is important to assess individual circumstances on a case-by-case basis. Some are better off with a deductible amount, while others may benefit from the deeming assessment. The asset test may also be an overriding factor.


If you and your financial planner aren’t sure of your benefit start date or the affects super pension changes have on your means testing, talk AdviceLink today.