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Deemed Income from Superannuation & Roll-over Investments

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Forms of investment that are classed as superannuation fund investments

Superannuation and roll-over investments include:

  • approved deposit funds,
  • deferred annuities,
  • retirement savings accounts, and
  • investments in superannuation funds from which an income stream is not being paid.

Pensioners may:

  • be members of government, industry or corporate superannuation funds, or
  • have their own fund, often referred to as a 'Do-It-Yourself' (DIY) fund.
Application of deeming to superannuation and roll-over investments

Superannuation and roll-over investments are treated differently depending on the age and circumstances of the pensioner as described in the following table.

If the pensioner...

Then their superannuation or roll-over investment is...

  • Is less than pension age (for ISS, is less than qualifying age).
  • exempt from the income and assets tests, and
  • not subject to deeming.

Note: Where a person is unable to access any part of their superannuation fund investment after they reach pension age, the value of their investment may be exempted from the income and assets tests. The pensioner must apply in writing for an exemption under Section 52AA of the VEA, stating why they cannot access any part of their superannuation investment. A copy of the Request for Income and Assets Test Exemption application form can be obtained from the Investment Database Unit.

Contributions to a superannuation fund after date of grant

The following table describes the treatment of additional superannuation fund contributions made by pensioners whose superannuation investments are being assessed:

 

If the contributions are made by...

Then...

A pensioner

The additional contributions, as they are made:

  • add to the balance in the fund, and
  • increase the value of the investment subject to deeming and the assets test.

A pensioner's employer

Only the amount that is paid by the employer as part of their obligations under the Superannuation Guarantee Contribution will be disregarded as income. All contributions add to the value of the financial investment for deeming purposes and the assets test.

Salary sacrifice of income for superannuation

They are considered to be income in the hands of the pensioner. All contributions add to the value of the financial investment for deeming purposes.

Investments owned by non-pensioner partners

The following table describes the assessment of investments owned by non-pensioner partners, for the purpose of working out the pensioner partner's entitlement:

 

If the non-pensioner partner is...

Then...

Less than pension age

all amounts in superannuation and roll-over investments owned by them are exempt from assessment. If they make a withdrawal prior to age pension age, no assessment is made of investment growth.

Pension age

superannuation and roll-over investments owned by them are assessable when working out the pensioner partner's entitlement, whether or not the non-pensioner partner claims pension.

Switching between superannuation fund investments – prior to pension age

Switching between superannuation fund investments is allowed. No realisation is considered to have occurred when the amount concerned is switched directly (i.e. rolled over) into another superannuation fund investment or income stream product.    

 

Early withdrawals of superannuation

Prior to 28 December 2002, early withdrawals from a superannuation fund (i.e. by a person under 55 years of age) affected their income test. The component of any early withdrawal which represented profit, while the person was on income support payments, was assessed as income. The profit amount was held as income for 12 months from the date of withdrawal, or until turning 55 (if this occurs earlier).

After 28 December 2002, this profit rule for early withdrawals no longer applies to any pensioner. The profit rule was removed from the Veterans' Entitlements Act 1986 from this date.


 

 

Currently, the pension age for a veteran is 60 years of age (VEA 5QA).

The pension age for a non-veteran is determined by the table below:

Date of birth (both dates inclusive)

Age Pension age

1 July 1952 to 31 December 1953

65 years and 6 months

1 January 1954 to 30 June 1955

66 years

1 July 1955 to 31 December 1956

66 years and 6 months

On or after 1 January 1957

67 years

 

Qualifying age is defined in section 5Q(1) of the VEA and is equivalent to the pension age for a veteran which is described in section 5QA VEA as:

  •       60 years for a male,
  •       for females subject to age equalisation (refer to the table in section 5QA VEA).

Currently, the pension age for a veteran is 60 years of age (VEA 5QA).

The pension age for a non-veteran is determined by the table below:

Date of birth (both dates inclusive)

Age Pension age

1 July 1952 to 31 December 1953

65 years and 6 months

1 January 1954 to 30 June 1955

66 years

1 July 1955 to 31 December 1956

66 years and 6 months

On or after 1 January 1957

67 years

 

A superannuation fund is defined in the VEA as being:

  • a fund that is or has been a complying superannuation fund within the meaning of section 45 of the Superannuation Industry (Supervision) Act 1993 in relation to any tax year; or
  • an Australian superannuation fund (within the meaning of the Income Tax Assessment Act 1997) that is not a complying superannuation fund mentioned in paragraph (a) in relation to any tax year; or
  • a scheme for the payment of benefits upon retirement or death that is constituted by or under a law of the Commonwealth or of a State or Territory; or
  • an RSA within the meaning of the Retirement Savings Accounts Act 1997; or
  • any of the following funds (unless the fund is a foreign superannuation fund):
  • a fund to which paragraph 23(jaa), or section 23FC, 121CC or 121DAB, of the Income Tax Assessment Act 1936 (as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 2) 1989) has applied in relation to any tax year;
  • a fund to which paragraph 23(ja), or section 23F or 23FB, of the Income Tax Assessment Act 1936 (as in force at any time before the commencement of paragraph (a) of the definition of superannuation fund in former subsection 27A(1) of the Income Tax Assessment Act 1936) has applied in relation to the tax year that started on 1 July 1985 or an earlier tax year;
  • a fund to which section 79 of the Income Tax Assessment Act 1936 (as in force at any time before 25 June 1984) has applied in relation to the tax year that started on 1 July 1983 or an earlier tax year.

According to section 5J(1) of the VEA, an income stream includes:

  • an income stream arising under arrangements that are regulated by the Superannuation Industry (Supervision) Act 1993; or
  • an income stream arising under a public sector scheme (within the meaning of that Act); or
  • an income stream arising under a retirement savings account; or
  • an income stream provided by a life insurance business (within the meaning of the Life Insurance Act 1995); or
  • an income stream provided by a friendly society (within the meaning of the Income Tax Assessment Act 1996); or
  • an income stream designated in writing by the Commission for the purposes of this definition, having regard to the guidelines determined under subsection 5J(1F) of the VEA;
  • but does not include any of the following:
  • available money;
  • deposit money;
  • a managed investment;
  • a listed security;
  • a loan that has not been repaid in full;
  • an unlisted public security; or
  • gold, silver or platinum bullion.