Income streams: social security asset test (including legacy pensions)

Technical resource

Income streams are generally assessed under the social security asset test when they are commenced. There are special rules which apply to legacy pensions.

Account balances in the accumulation phase of superannuation are only subject to the asset test once the individual reaches Age Pension age. However, this is not the case with superannuation pensions.

Upon commencement of an account based pension, the account balance is captured under the assets test. The balance is then reviewed quarterly by Centrelink.

Term Allocated Pensions (TAPs) purchased between 20 September 2004 and 20 September 2007 are 50 per cent asset test exempt providing they comply with the requirements contained in Section 9BA in the Social Security Act 1991.

Lifetime and life expectancy pensions and annuities purchased prior to 20 September 2004 are 100% asset test exempt providing they comply with the requirements contained in Sections 9A or 9B of the Social Security Act 1991.

Lifetime and life expectancy pensions and annuities purchased from 20 September 2004 but prior to 20 September 2007 are 50% asset test exempt providing they comply with the requirements contained in Sections 9A or 9B of the Social Security Act 1991.

For lifetime and life expectancy pensions and annuities subject to the asset test (including 50% asset test exempt income streams), the purchase price is depreciated every six months (in arrears) where there are at least two payments made annually. Where only one payment is made annually, the asset is depreciated annually in arrears. Examples of this treatment can be accessed in the Social Security Guide.

For defined benefit pensions paid from a public or private superannuation fund established before 20 September 1998, there is no assessment under the assets test provided certain conditions are met. Details of these conditions are outlined in the Social Security Guide.

For defined benefit pensions that do not satisfy the conditions for assets test exemption, the asset value used is determined annually using the below formula.

Annual payment x pension valuation factor

Details of the pension valuation factors which are based on life expectancy and the indexation rate of the income stream are outlined in the Social Security Guide.

All income streams purchased on or after 20 September 2007 are asset tested unless purchased with proceeds from the commutation of an asset test exempt income stream. Refer to the Social Security Guide for more information.

Next: Income streams: social security income test (including defined benefits)

Income streams are generally assessed under the social security income test when they are commenced. The specific treatment will depend on the type held.
Technical resource

Contact BT Technical Services for more information

An outline of what is assessed in the assets test and income test. All assets that the client has are assessable under the assets test.
Technical resource
Most income streams are sourced from account based pensions and insurance companies (annuities) with the same and concessional tax structure for both.
Technical resource
Special rules apply to defined benefits including how they interact with the concessional cap, transfer balance cap and defined benefit income cap.
Technical resource

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