Time is running out for those wanting an account based pension.
Deeming on account based pensions will come into effect on the 1st January 2015, therefore to be subject to the old and more favourable rules a person must:
- Have commenced an account based pension prior to 1 January 2015;
- Be in receipt of an income support payment prior to 1 January 2015.
Section 23(1) of the Social Security Act 1991 (Cth) defines an income support payment as one of:
a) a social security benefit including any of the following:
- Widow allowance • youth allowance
- Austudy payment
- Newstart allowance
- Sickness allowance
- Special benefit
- Partner allowance
- A mature age allowance under Part 2.12B
- Benefit PP (partnered)
- Parenting allowance (other than non-benefit allowance)
b) a job search allowance
c) a social security pension including any of the following:
- an age pension
- a disability support pension
- a wife pension
- a carer payment
- a pension PP (single)
- a sole parent pension
- a bereavement allowance
- a widow B pension
- a mature age partner allowance
- a special needs pension
d) a youth training allowance
e) a service pension
f) income support supplement.
A person on a carer allowance does not qualify.
Note that DVA War widow, DVA disability, rent assistance and a holder of a Centrelink/DVA concessional card doesn’t qualify as in being in receipt of income support. This is because a service pension is restricted to the following under section 23(1):
a) an age service pension under Part III of the Veterans’ Entitlements Act, or
b) an invalidity service pension under Part III of the Veterans’ Entitlements Act, or
c) a partner service pension under Part III of the Veterans’ Entitlements Act, or
d) a carer service pension under Part III of the Veterans’ Entitlements Act.
Your questions answered:
Q1 – If I’m on a Carer Payment, is that going to satisfy the rules come 1/1/2015 (providing that I’m in receipt of an account based pension on 1/1/2015)?
A1 – Yes
Q2 – If I’m receiving a transition to retirement pension (as of 1/1/2015) and on an income support payment pre 1/1/15 does this satisfy the requirements?
A2 – Yes, this would satisfy the grandfathering requirements.
Q3 – Once a TTR pension reverts to an account based pension, is that still considered the same income stream, for purpose of the grandfathering rules?
A3 – Yes, it’s still the same income stream.
Q4 – How will account based pensions started after 1/1/2015 be treated for clients who are on other benefits like a disability support pension or a carer’s payment after 1/1/2015? (that is, if they started their account based pension after then)?
A4 – All account based pensions will be deemed if they have commenced after 1/1/2015 regardless of what sort of benefit that they are on. However, if someone starts an account-based pension prior to 1/1/2015 and is on either disability support pension or a carer’s payment, then their account based pension will be grandfathered.
Whilst this pending change has largely gone under the radar, it would be prudent to seek professional financial advice to discuss your options sooner than later to ensure your future entitlements are not lost.
If you are not sure of your options leading to this deal-line or wish to simply discuss this issue with one of our retirement specialists, please either call on 1300 99 77 34 for a chat or email your questions to https://www.chan-naylor.com.au/contact-chan-naylor-wealth-planning/
Disclaimer: This article contains general information. Before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.