Assessing Superannuation
This article looks at how superannuation accumulation accounts and superannuation pension accounts are assessed under the assets test and the incomes test.
As explained in previous articles, the combined value of a couples assets and income is used to determine eligibility for the age pension. This is the case regardless of whether both members of the couple are age eligible or just one member of the couple is age eligible.
Superannuation and the assets test
This is important to understand because superannuation in accumulation phase is only assessed as an asset once you have reached your Age Pension eligibility age. This means that if you are age eligible for the Age Pension the value of your superannuation is included in the value of your combined assets for assets test purposes. If you partner is not age eligible for the Age Pension, your partner’s superannuation is NOT included in the value of your combined assets. This is a significant concession that allows you to control what assets you are assessed on.
Note that this is not the case where a superannuation accumulation account has being converted to a superannuation pension account. Regardless of the age of the holder of a superannuation pension account, all pension accounts are included in the value of your combined assets.
Superannuation and the income test
Where a superannuation account or pension account (commenced on or after 1 January 2015) is assessed for age pension purposes, the account balance is deemed to earn income regardless of what it is actually earning.
If your pension account commenced before 1 January 2015, your pension account will have a deductible amount that was calculated at the time of commencement of the pension. This amount, which is called the deductible amount, is calculated by dividing the purchase price (or starting balance) of the pension by the life expectancy of the pensioner or the reversionary pensioner if one was nominated. The amount of pension paid less the deductible amount is the amount that is treated as income for incomes test purposes.
These varying treatments of superannuation accounts and pension accounts means that couples with the exact same superannuation assets and pension assets could be assessed quite differently. It also means that in some cases moving assets into superannuation could enhance couples Age Pension benefits. Recommencing a pension, thereby resetting the start date, has the potential to improve pension benefits but also has the potential to be detrimental to pension benefits dependent on the underlying numbers.
For these reasons and because there can be much wider implications of making changes to your financial situation, we recommend strongly that you do not make any changes to your situation without first seeking financial advice from a qualified financial adviser.