Too much income - loss of grandfathered pension status

The Centrelink treatment of superannuation pensions materially changed from 1 January 2015.  Before that date superannuation pensions were assessed for the Centrelink income test on the “deductible amount” basis.  Since that date they are assessed as financial assets and subject to the “deeming test”.  The “deeming test” is less favourable and generally results in a lower age pension entitlement.  

For superannuation pensions which commenced before 1 January 2015 they will be “grandfathered” so that the “deductible amount” basis will continue to apply.  This grandfathering will continue until either the superannuation pension is terminated or the pensioner ceases to be entitled to the age pension.  Once grandfathered status is lost, it cannot be regained.

In a recent case (the Howie Case [2017] AATA 1149), the AAT  has confirmed that a pensioner couple’s three superannuation pensions had lost their grandfathered status.  The loss arose because the couple’s entitlement to the age pension in respect of one fortnight period, was assessed to be nil (as a result of earning income in respect of that fortnight by reason of undertaking casual employment).  As the pensioner couple ceased to be entitled to the age pension, even for a short period, all three super pensions lost their “pre 1 January 2015” status resulting in material and permanent reduction in their age pension entitlement.

The lesson to be learnt is:  if there are grandfathered superannuation pensions – be very careful not to derive too much income so that the cut off threshold for the age pension is reached or exceeded.