So what has changed?
Up until the beginning of 2015, Account Based Pensions (ABP’s) were treated favourably by Centrelink and DVA, and assessed under the income test rules based on the level of income that they were producing in order to determine how much income support would be paid.
From 1 January 2015, ABPs will no longer have the income test applied, but rather will become subject to the deeming rules in the same way shares and/or property are. This will occur regardless of if the level of pension being drawn from the ABP and/or the level of income being produced by the ABP.
Who is, or will be, affected by these changes?
Changes will affect two categories of clients:
1. Those who are already in receipt of income support payments.
From 1 January 2015, clients that purchase a new ABP will be assessed using a deemed amount of income irrespective of much pension they are actually drawing down and/or how much income is actually being earned by the underlying investments within the income stream.
This is different to the old structure, as there used to be a deducible amount or capital offset that was applied when somebody chose to reduce the amount of pension that they would take. ABP’s that were in existence prior to 1 January 2015, will be subject to grandfathering provisions. This means that they will continue to be assessed under the old rules, provided that the ABP was created prior to 1 January 2015 and there was an existing ‘uninterrupted’ Income Support Benefit already being received.
It’s important to note that there are some payments that are not considered as income support payments for the purpose of grandfathering, for example, Carers Allowance; Rent Assistance; Low Income health care cards; DVA war widows and DVA Disability Pension.
2. Those who have or are in the process for applying for Commonwealth Seniors Health Card (CSHC).
There have been no changes to the assessment of pre-existing CSHC holders, who have had an existing an ABP and who have been in receipt of income support payments prior to 1 January 2015.
Here are also changes to the Commonwealth Seniors Health Card (CSHC) and how how these changes will affect clients who hold them:
| Circumstances | Changes |
| If you hold a CSHC continuously from 31 December 2014 and have existing account-based income streams | No change for the account-based income streams you already hold on or before 31 December 2014. |
| If you are a CSHC holder and purchase a new account-based income stream from 1 January 2015 | The deemed income from any new products you purchase from 1 January 2015 will be used to assess your entitlement for a CSHC. |
| If you commence holding a CSHC from 1 January 2015 | The deemed income from your account-based income stream products will be used to assess your entitlement for a CSHC. |
| If you are a CSHC holder and have a partner who is aged 60 years or over and they have account-based income streams | The deemed income from your partner’s account-based income stream products, regardless of when they were purchased, will be used to assess your entitlement for a CSHC. |
| If you are a CSHC holder and change your account-based income stream from 1 January 2015 | The deemed income from any new products you purchase from 1 January 2015 will be used to assess your entitlement for a CSHC. |
| If you are a CSHC holder and you depart Australia temporarily from 1 January 2015 | You will be able to travel outside Australia for up to 19 weeks before your CSHC card is cancelled. |
https://www.humanservices.gov.au/customer/news/changes-to-payments-for-older-australians
Where can Centrelink recipients find out more?
More information is available on https://www.humanservices.gov.au/ or you can contact our office for more information on (03) 9999 7200 or here.
As published in BT Adviser insights. All information provided in this newsletter is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.