Sheena Stow-Smith from PensionHelp answers reader questions how super affects Disability Support.
Q: I am about to turn 60 on the 2nd of December and have been unemployed for over 10 years. Can I access my super and still receive unemployment benefits without having to pay tax?
A: Generally yes, but you may need to be aware of what you do with the funds so they don’t affect your benefit.
Superannuation is exempt from the Centrelink Assets and Income Tests until you reach age 67, your Age Pension age. So, leaving money in super will allow most people to maximise their benefits.
As you withdraw funds from your super, generally tax free over age 60, your Centrelink benefit may reduce depending on what the funds are used for.
If you use super withdrawals for living expenses, this is not going to reduce your benefit. However, if your super withdrawals sit in a bank account or investment that is assessable, you may see your benefit reduce or stop for a period if your assets and deemed income exceed the benefit thresholds.
If you are gifting your super withdrawals to someone, the amount will only be assessable if it exceeds the gifting limits of $10,000 in a year or $30,000 maximum over 5 years.
- Super lump sum withdrawals won’t be counted as income under the income Test. Super in the accumulation phase (not a pension account) will remain a Centrelink exempt asset until you reach age 67, your Age Pension age.
- Super pension payments won’t be counted as income, but the balance of a super pension will become an assessable asset and the balance is deemed for the Income Test. This is because the money is now out of the accumulation or super environment and paying a regular income. A super pension account may see your benefit reduce or stop depending on your other assets
The general income and assets tests before your Jobseeker payment stops is:
|Situation||Upper income limit per fortnight||Upper assets limit (Homeowner)||Upper assets limit (Non-homeowner)|
|Single no children||$1,231.50||$270,000||$487,000|
|Partnered||$1,136.34 if you are the applicant or|
$2,105.67 for partner if applicant receives less than $150 per fortnight
$2,272.68 per fortnight combined if partner is pensioner
- The Jobseeker payment (previously called Newstart) is taxable income
- Benefit amounts will be combined with any other taxable income to calculate your tax rate and amount of tax to pay
- Super lump sums and pension payments are generally non-assessable for tax (provided they are from a taxable component – you can check this with your super fund) for those over age 60..
Q: My husband and I inherited $300,000 almost 2 years ago which we put into a super account in my name (as I am 3 years his junior) utilising the bring-forward rule. He is 64 and receives the disability support pension while I receive carers payment and allowance.
My question is, after I reach 67 would it be better to leave the super in the accumulation phase and continue to try and add to it or start an income stream? Is one treated “less harshly” by Centrelink than the other? I don’t reach 67 for some 6 years and many things can change, however, as the system stands now, which would you recommend? I’m simply doing some early maths and research.
A: It was a great move to contribute the funds to your account, being younger than your partner. For Centrelink benefits including the Disability Support Pension and the Carer Payment, super is exempt under the Assets and Income Tests while you remain under the Age Pension age of 67. This will allow for you and your partner to maximise your benefits until you reach age 67.
When you do reach age 67, the current rules mean super and super income streams are treated the same for new Age Pensioners or even those on a current income support like Carers Payment:
- The balance is an assessable asset under the Assets Test and
- The balance is deemed and the deemed income is assessed under the Income Test.
The choice would come down to your income preferences and tax considerations. Income streams offer regular income payments and tax-free earnings. Both super and income streams are treated the same by Centrelink for those over age 67.
There is an exception for those that meet some grandfathered criteria:
- If an income stream was commenced before 31 December 2014, and
- The owner of the income stream has been a continuous recipient of income support payments from this date.
In this case, there is a different Centrelink treatment for their income stream. The income from this pension is not deemed, but rather a portion of the income payment received is exempt income, this is known as the deductible amount. Income amounts received above the deductible amount are assessed as income under the Income Test. The deductible amount treatment does not always mean a better outcome for income support recipients so it is worth getting some specialised advice to see if the new rules would be better for your Centrelink benefits and how you could access these.
Q: I’m a carer for a disabled person. Could you please tell me if deeming applies to the Disability Support Pension, or only to the Age Pension?
A: Yes, the Age Pension and Disability Support Pension have the same means testing rules. Deeming is used for the Income Test in both these payments.
The deeming rules are used to calculate income from financial investments for income testing purposes. Financial investments include bank accounts, shares, managed investments and most superannuation.
Deeming assumes that financial investments are earning a certain rate of income, regardless of the amount of income they’re actually earning. If a person earns more than the deemed rates, Centrelink doesn’t assess the extra income.
Deemed income is added to other assessable income, such as salary or wages, and the income test is applied to assess if a benefit is payable.
The current thresholds and rates are:
|Status||Financial investments||Deeming rate (annual)|
|Single||the first $53,600||0.25%|
|additional amounts above $53,600||2.25%|
|Couple combined||the first $89,000||0.25%|
|additional amounts above $89,000||2.25%|
For example, a couple with $500,000 in financial assets will have a deemed income assessment of $9,470 per annum ($89,000 x 0.25% and the remaining $411,000 of the financial assets x 2.25%).
Deeming applies to many Centrelink income support payments, including the following:
- Age Pension – you may get this if you’re 66 or older
- Commonwealth Seniors Health Card – you may get this if you’re 66 or older and not eligible for the Age Pension. Deeming is only applied to any superannuation income streams
- Austudy – you may get this if you’re 25 or older and studying or an Australian apprentice
- Carer Payment – you may get this if you care for someone who has a severe disability, illness, or is frail aged
- Disability Support Pension – you may get this if you have a permanent physical, intellectual or psychiatric condition that stops you working
- JobSeeker Payment – you may get this if you’re between 22 and Age Pension age and looking for work
- Parenting Payment – you may get this if you’re the main carer of a young child
- Special Benefit – you may get this if you’re not eligible for any other income support from Centrelink
- Farm Household Allowance – you may get this if you’re a farming family in financial hardship
- Youth Allowance – you may get this if you’re 24 or younger and a student or Australian apprentice, or 21 or younger and looking for work.
Deeming does not apply to benefits like:
- Dad and Partner Pay, paid for fathers and partners for the care of a newborn or recently adopted child
- Family Tax Benefit, a payment to help with the cost of raising children
- Carers Allowance, paid if you provide daily care to someone frail or disabled
- Low Income Health Care Card.
For these benefits, the income test is based on adjusted taxable income.
Q: I’d like to know if the Centrelink Disability Support Pension (DSP) is affected by a super lump sum payment or income stream once the DSP recipient reaches preservation age?
A: Let’s take the first half of your question first. For the Disability Support Pension means test:
- Super lump sum withdrawals won’t be counted as income under the Centrelink Income test. Super in the accumulation phase (not a pension account) will remain a Centrelink exempt asset until you reach age 67, the Age Pension age.
- Super income stream payments won’t be counted as income but the balance of a super pension account will become an assessable asset and the balance is deemed for the income test. This is because the money is now out of the accumulation or superannuation environment and paying a regular income. A super pension account may see your benefit reduce or stop depending on your other assets.
The biggest factor here is not your preservation age, when you can access your super, but your Age Pension age. This is regardless of the payment that you receive from Centrelink.
Another consideration is what you do with the lump sum. If you use this for living expenses, it won’t affect your support payment. If you hold this in your bank account, you may see your payment reduce.
Check out SuperGuide’s article explaining How the Age Pension is assessed to make sure that you remain under the income and asset thresholds before making any changes to your situation.