10.4 Superannuation Funds
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This chapter contains information on the accumulation phase [2] of superannuation, including outlines of the various types of superannuation structures.
It also covers the assessment of income from withdrawals of superannuation benefits.
See Also
Superannuation
Chapter 9.1 Income and Assets Test Principles [3]
Chapter 9.5 Deeming Provisions [4]
The accumulation phase is the period during a person's working life in which superannuation contributions are paid into a superannuation fund, with the aim of maximising the sum available for retirement through investment and tax concessions.
10.4.1 Overview of Superannuation Funds
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What is superannuation?
The primary purpose of a superannuation scheme is to provide its beneficiaries with financial resources and other benefits during their retirement.
More → [9]
To provide eventual retirement benefits, both employer-sponsored and personal superannuation schemes:
- receive contributions during the accumulation phase [2],
- manage the invested contributions, and
- distribute benefits to beneficiaries of the superannuation fund [2] during the draw down phase [2].
Types of superannuation funds
The two main types of superannuation funds are:
- accumulation or defined contribution funds, where contributions are defined for employers and employees [2] such as a percentage of salary, and
- defined benefit funds, where the employee's contributions are defined and the employer contributes whatever additional amounts are needed to meet the fund's obligations to its beneficiaries. More → [10]
Eligible termination payments
An eligible termination payment [2] is a lump sum payment, made by an employer or a superannuation fund when a person leaves employment, by:
- retiring,
- taking voluntary or involuntary retrenchment, or
- resigning
Roll-over funds
Roll-over [2] funds are approved investment funds for eligible termination payments, some of which must be preserved.
Preserved amounts generally cannot be accessed until the beneficiary:
- reaches preservation age [2], and
- retires from the workforce.
Early release of superannuation benefits
The superannuation legislation allows early release of preserved superannuation benefits [2] in limited circumstances. Circumstances include severe financial hardship, specified grounds such as medical treatment or permanent incapacity, and in special circumstances where a person has permanently departed Australia.
More → [11]
Assessing superannuation assets
The following factors govern the assessment of a pensioner's superannuation assets by DVA [2]
- whether the superannuation assets are in the accumulation or draw down phase,
- the person's age, and
- the person's history of income support. More → [12]
Compulsory Superannuation Guarantee payments
Prior to 1 July 2013, the compulsory superannuation guarantee contributions paid by employers are limited to employees under 70 years of age, and are paid at a minimum of 9% of the employee's ordinary time earnings. This applies whether the person is in full time, part time or casual employment. Employers are required to pay these amounts into a complying superannuation fund [2].
From 1 July 2013, the compulsory superannuation guarantee contributions will be extended to people aged 70 years and over. It is intended that the 9% rate will progressively increase by variable annual increments, reaching 12% in 2019-20.
For a person who has attained pension age [2], the superannuation fund money (including the compulsory employer contributions) may be held in accumulation mode, with the current value being assessed as a financial asset and deemed. At the time of converting the superannuation fund money to pension, the income stream rules apply.
It is not necessary for pensioners to notify the Department of their compulsory superannuation guarantee contributions, as they are not assessed as income [2]. Increases in the value of the superannuation fund investment held in accumulation mode are reportable.
Pensioners also need to notify the commencement of a pension payment by providing an income stream schedule [13]. The income support assessment depends on the commencement date of the income stream and whether the owner has continuously received an income support payment since 31 December 2014. The income stream will be assessed by either:
- deeming [14] the current account balance, or
- including the gross annual payments (less a deduction for the return of the original purchase price) [15].
Early release of superannuation benefits - hardship
10.4.3/Early Release of Superannuation Benefits [21]
Chapter 3.10 Financial Hardship [22]
The accumulation phase is the period during a person's working life in which superannuation contributions are paid into a superannuation fund, with the aim of maximising the sum available for retirement through investment and tax concessions.
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 [27]):
- 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.
The draw down phase is the period, after retirement from the workforce, when a person receives regular payments of superannuation benefits from their superannuation fund or an income stream product.
An employee is someone who is:
- under a contract of service to an employer, and
- a salary or wage earner, and
- subject to PAYE tax deductions.
An ETP is a payment (usually on retirement or termination of employment) which receives concessional tax treatment according to a specified set of rules. It can be transferred to funds which have been granted similar tax concessions by the government.
To roll-over, in relation to an eligible termination payment, means to invest all or part of the payment in an approved superannuation or roll-over fund, according to the requirements of section 27D of the Income Tax Assessment Act, 1936.
Preservation age is the age at which a person may be able to gain access to preserved benefits held in approved deposit funds and superannuation.
From 2015 to 2025, the preservation age will gradually increase to sixty years for people born after 1 July 1960. Specifically:
| For a person born... | preservation age is... |
| before 1 July 1960 | 55 years old |
| during the year 1 July 1960 to 30 June 1961 | 56 years old |
| during the year 1 July 1961 to 30 June 1962 | 57 years old |
| during the year 1 July 1962 to 30 June 1963 | 58 years old |
| during the year 1 July 1963 to 30 June 1964 | 59 years old |
| after 30 June 1964 | 60 years old. |
To access preserved benefits on reaching preservation age, an income support recipient must also satisfy one of the following:
- be retired from gainful employment;
- have reached age 65;
- be permanently incapacitated;
- be in severe financial hardship; or
- obtain release on compassionate grounds.
The person must also meet the conditions of the particular fund's governing rules.
Legislative reference: Regulation 6.01 Supernnuation Industry (Supervision) Regulations 1994
Section 5J(1) of the VEA [28] defines a superannuation benefit, in relation to a person, as a benefit arising directly or indirectly from amounts contributed (whether by the person or by any other person) to a superannuation fund in respect of the person.
The Department of Veterans' Affairs.
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 [27]):
- 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.
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 |
According to section 5H of the VEA [29] income is:
- an amount earned, derived or received by a person for the person's own use or benefit;
- a periodical payment by way of gift or allowance; or
- a periodical benefit by way of gift or allowance.
10.4.2 Description of Superannuation
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This section contains the general provisions on superannuation and describes its structure.
It also contains information about the types of superannuation schemes, eligible termination payments [2] and roll-over [2] funds.
An ETP is a payment (usually on retirement or termination of employment) which receives concessional tax treatment according to a specified set of rules. It can be transferred to funds which have been granted similar tax concessions by the government.
To roll-over, in relation to an eligible termination payment, means to invest all or part of the payment in an approved superannuation or roll-over fund, according to the requirements of section 27D of the Income Tax Assessment Act, 1936.
What is Superannuation?
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Purpose of superannuation
The primary purpose of a superannuation scheme is to provide its beneficiaries with financial resources and other benefits during their retirement. Other benefits in some schemes include death benefits for surviving dependants and disability benefits. The Australian superannuation system is intended to fund higher standards of retirement living than continuing reliance on income support pensions [2] as the primary source of retirement income. Most Australians in the workforce are now covered by superannuation schemes with membership and contributions that are either:
- compulsory under superannuation law [2] or industrial awards,
- voluntary, both for the employer and employee [2], or
- a combination of both.
How superannuation operates
To provide eventual retirement benefits, both employer-sponsored and personal superannuation schemes:
- receive contributions during the accumulation phase [2],
- manage the invested contributions, and
- distribute benefits to beneficiaries during the draw down phase [2].
The fund's trustee is responsible for implementing an appropriate investment strategy to protect the interests of beneficiaries while increasing the value of the fund's assets.
How superannuation benefits are paid
Depending on the type of fund, benefits paid on retirement or earlier departure from the fund consist of:
- a lump sum,
- a pension, or
- a combination of both.
Income support pension is:
- a social security pension [2]
- a service pension;
- an income support supplement.
The superannuation law includes:
- the Superannuation Industry (Supervision) Act 1993; and
- the Superannuation Industry (Supervision) Regulations 1994.
An employee is someone who is:
- under a contract of service to an employer, and
- a salary or wage earner, and
- subject to PAYE tax deductions.
The accumulation phase is the period during a person's working life in which superannuation contributions are paid into a superannuation fund, with the aim of maximising the sum available for retirement through investment and tax concessions.
The draw down phase is the period, after retirement from the workforce, when a person receives regular payments of superannuation benefits from their superannuation fund or an income stream product.
Types of Superannuation Funds
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The two main types of superannuation funds
The following table shows the differences in treatment of contributions and benefits between the two main types of superannuation funds [2].
|
Fund type |
Contributions |
Benefits |
|
Accumulation or defined contribution |
Defined for employers and employees [2] such as a percentage of salary |
Lump sum - Amount depends on performance of fund and amount of contributions. |
|
Defined benefit |
Employee's contributions defined. Employers contribute whatever additional amounts are needed to meet fund's obligations to its beneficiaries. |
Either:
Amount is usually based on final salary or average final salary (often the last 3 years) x a multiple. The multiple itself is usually a combination of length of membership and a percentage of final salary for each year of service. |
Examples of superannuation schemes
The various types of employer sponsored and personal superannuation schemes include:
- Public sector funds established for Australian and state government employees,
- Corporate funds established by medium to large private sector companies for their employees,
- Industry, or multi employer, funds for paying employer contributions to superannuation for employees covered by particular awards,
- Self-managed superannuation funds (SMSF) and small APRA funds [2], More [33]
- ATO Small Superannuation Accounts [2], designed for employer contributions which any other superannuation fund will not accept,
- Retirement savings accounts offered by banks,
- Retail funds or public offer funds, covering superannuation funds available to the general public, including employers and the self employed.
Description of Self Managed Superannuation Funds and Small APRA Funds
10.5.5/Description of Self Managed Superannuation Funds and Small APRA Funds [34]
More ? (go back) [35]
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 [27]):
- 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.
An employee is someone who is:
- under a contract of service to an employer, and
- a salary or wage earner, and
- subject to PAYE tax deductions.
This is a fund with less than five members that does not meet the criteria for an SMSF. The trustee of an SAF must be a corporate trustee approved by APRA. The trustee may receive remuneration for acting as trustee.
An ATO small superannuation account is an account kept in the name of an individual under the Small Superannuation Accounts Act 1995.
10.4.3 Assessment of Superannuation Benefits
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This section contains information on the income [2] and assets [2] testing, in the accumulation phase [2], of income from withdrawals of superannuation benefits [2].
According to section 5H of the VEA [29] income is:
- an amount earned, derived or received by a person for the person's own use or benefit;
- a periodical payment by way of gift or allowance; or
- a periodical benefit by way of gift or allowance.
An asset means any property, including property outside Australia.
The accumulation phase is the period during a person's working life in which superannuation contributions are paid into a superannuation fund, with the aim of maximising the sum available for retirement through investment and tax concessions.
Section 5J(1) of the VEA [28] defines a superannuation benefit, in relation to a person, as a benefit arising directly or indirectly from amounts contributed (whether by the person or by any other person) to a superannuation fund in respect of the person.
General Provisions for Assessing Superannuation
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Principles for assessing superannuation assets
DVA's assessment of a pensioner's superannuation assets depends on:
- whether the superannuation assets are in the accumulation phase [2] or draw down phase [2], and
- the pensioner's age.
Assessment in the accumulation phase
VEA → [38]
No income or asset value is assessed from superannuation in the accumulation phase where the person is below pension age [2]. If the person has reached pension age, the superannuation is assessed under the income and assets tests as a financial asset [2].
More → [43]
Exemption from assessment after reaching pension age
VEA → [44]
Superannuation in the accumulation phase may be exempted from the assets test in certain limited circumstances. Delegation to exempt superannuation in these circumstances is held by the National Manager, Rehabilitation and Entitlements Policy Group. Exemptions are only allowed where the person cannot access their superannuation due to:
- a legislative preclusion (eg court order),
- a contractual preclusion (eg conditions of release not met),
- the fixed term not having expired for contracts entered into before 20 August 1996 (only if the original contract has not expired),
- the rules of the fund as at 20 August 1996 preventing release (the exemption would only apply to the balance as at 20 August 1996),
- the superannuation being a traditional endowment or life superannuation contract entered into before 20 August 1996 and not having been varied since (the exemption would only to apply to the balance and additional amounts specified in the contract as at 20 August 1996).
Assessment in the drawdown phase
VEA → [47]
Part IIIB, Division 4 [48] VEA – Income from income streams
Part IIIB, Division 11, Subdivision A [49] VEA – Value of person's assets
The income and asset value of superannuation in the drawdown phase is assessed according to the income stream [2] rules. This also applies if the superannuation is in the drawdown phase and the person is below pension age.
More → [51]
Assessment of whole of life superannuation policies
Whole of life superannuation policies are subject to the same rules as other superannuation funds. However, whole of life conventional life insurance products are treated differently.
More → [52]
The assessable asset value of whole of life superannuation policies is the accumulated superannuation benefit [2] shown on the pensioner's latest statement of account. The amount payable from the policy in the event of the death of the insured party is not relevant.
Splitting of superannuation interests on separation
A superannuation interest in the accumulation phase may be split where members of a couple separate and one or both members of the couple have a superannuation interest. The split may be made under a superannuation agreement or a court order. The options available for splitting a superannuation interest are:
- Pay a lump sum to the non-member spouse
- Create a new superannuation interest in the non-member spouse's name in the same superannuation fund [2]
- Transfer or roll-over [2] a lump sum to a retirement savings account or another superannuation fund in the non-member spouse's name.
Regardless of the option chosen for splitting a superannuation interest, the non-member is not entitled to receive any further payments. Different rules apply to superannuation interests in the drawdown phase.
More → [53]
Deprivation not to apply on splitting superannuation interest
The deprivation rules do not apply to the splitting of a superannuation interest pursuant to an agreement or a court order.
Part IIIB, Division 4 [48] VEA – Income from income streams
Part IIIB, Division 11, Subdivision A [49] VEA – Value of person's assets
The accumulation phase is the period during a person's working life in which superannuation contributions are paid into a superannuation fund, with the aim of maximising the sum available for retirement through investment and tax concessions.
The draw down phase is the period, after retirement from the workforce, when a person receives regular payments of superannuation benefits from their superannuation fund or an income stream product.
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 |
According to section 5J(1) [28] of the VEA a financial asset means;
- a financial investment [2], or
- a deprived asset [2]
According to subsection 5J(1) of the VEA [28], 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 as life insurance business by a life company registered under section 21 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 [28];
but does not include any of the following:
- available money;
- deposit money;
- a managed investment;
- an investment in a public unit trust;
- an investment in an insurance bond;
- an investment with a friendly society;
- an investment in a superannuation fund;
- an investment in an approved deposit fund;
- an investment in an ATO small superannuation account;
- a listed security;
- a loan that has not been repaid in full;
- an unlisted public security;
- gold, silver or platinum bullion; or
- a payment of compensation in relation to a person's:
- inability to earn, derive or receive income from remunerative work; or
- total and permanent disability or incapacity.
Section 5J(1) of the VEA [28] defines a superannuation benefit, in relation to a person, as a benefit arising directly or indirectly from amounts contributed (whether by the person or by any other person) to a superannuation fund in respect of the person.
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 [27]):
- 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.
To roll-over, in relation to an eligible termination payment, means to invest all or part of the payment in an approved superannuation or roll-over fund, according to the requirements of section 27D of the Income Tax Assessment Act, 1936.
Early Release of Superannuation Benefits
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Last amended: 13 August 2013
Release of benefits
The superannuation law [2] allows release of preserved superannuation benefit [2] when the person has reached preservation age [2] and the person either:
- has retired from gainful employment and
- has reached age 65; or
- is permanently incapacitated, or
- is in severe financial hardship, or
- can obtain release on compassionate grounds.
Early release of benefits due to severe financial hardship
Early release of benefits on the grounds of severe financial hardship is permitted when:
- a person has met the income support payment [2] requirements,
- the superannuation fund trustee considers they are unable to meet reasonable and immediate family living expenses,
- a person is not gainfully employed on a part-time or full-time basis, and
- the rules of the superannuation fund [2] permit release.
Severe financial hardship - income support requirements
The following table shows the conditions to be met for people who request the early release of their superannuation benefits to be classed as being in severe financial hardship. Different conditions apply where the superannuation benefit [2] is held in the Superannuation Holding Accounts Reserve [2].
|
If a person's age is... |
They are in severe financial hardship if they received an income support payment... |
And withdrawals are ... |
|
less than 55 years and 39 weeks |
for a continuous period of 26 weeks immediately prior to application. Pensioners also need to satisfy the superannuation fund trustee that they are unable to meet reasonable and immediate family living expenses |
restricted to one withdrawal and a maximum $10,000 each twelve months. |
|
55 years and 39 weeks or more |
People of this age who do not meet these requirements will also be able to access their superannuation if they meet the requirements for people less than 55 years and 39 weeks. |
not restricted. |
Superannuation Holding Accounts Reserve – income support requirements
The qualifying period of income support for superannuation investments in superannuation holding accounts reserve is fifty two weeks (continuous) for people aged less than 55 years and 39 weeks, and at least thirty nine weeks (cumulative) for people aged 55 years and 39 weeks or more.
DVA's role in the early release of benefits
Applications for release of superannuation benefits on the grounds of severe hardship are made to the person's superannuation fund, and must be submitted with a letter confirming the period of the person's income support payments received from DVA [2]. DVA does not have any role in whether all of the conditions for early release of benefits have been met. DVA's only role is to supply, on request from a person, confirmation that the pensioner has received income support payments for the required period.
Notification of early release of benefits
Pensioners must notify DVA if any benefits are released, as this may affect their income support payments.
More → [61]
People who do not meet the severe financial hardship requirements
There are very limited compassionate grounds that allow a person who does not meet the income support requirements to gain access to their superannuation benefits. These include a requirement to pay for medical treatment or medical transport, mortgage assistance, modifications to a home and/or motor vehicle in the case of a severe disability, care for a terminal medical condition, or for funeral assistance. The Department of Human Services considers applications on compassionate grounds, and a person's superannuation fund trustee or retirement savings account provider can provide advice to pensioners.
The superannuation law includes:
- the Superannuation Industry (Supervision) Act 1993; and
- the Superannuation Industry (Supervision) Regulations 1994.
Section 5J(1) of the VEA [28] defines a superannuation benefit, in relation to a person, as a benefit arising directly or indirectly from amounts contributed (whether by the person or by any other person) to a superannuation fund in respect of the person.
Preservation age is the age at which a person may be able to gain access to preserved benefits held in approved deposit funds and superannuation.
From 2015 to 2025, the preservation age will gradually increase to sixty years for people born after 1 July 1960. Specifically:
| For a person born... | preservation age is... |
| before 1 July 1960 | 55 years old |
| during the year 1 July 1960 to 30 June 1961 | 56 years old |
| during the year 1 July 1961 to 30 June 1962 | 57 years old |
| during the year 1 July 1962 to 30 June 1963 | 58 years old |
| during the year 1 July 1963 to 30 June 1964 | 59 years old |
| after 30 June 1964 | 60 years old. |
To access preserved benefits on reaching preservation age, an income support recipient must also satisfy one of the following:
- be retired from gainful employment;
- have reached age 65;
- be permanently incapacitated;
- be in severe financial hardship; or
- obtain release on compassionate grounds.
The person must also meet the conditions of the particular fund's governing rules.
Legislative reference: Regulation 6.01 Supernnuation Industry (Supervision) Regulations 1994
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 [27]):
- 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.
Section 5J(1) of the VEA [28] defines a superannuation benefit, in relation to a person, as a benefit arising directly or indirectly from amounts contributed (whether by the person or by any other person) to a superannuation fund in respect of the person.
The superannuation holding accounts reserve is the fund in which small accounts administered by the Australian Taxation Office are held.
The Department of Veterans' Affairs.
General Provisions for Assessing Withdrawals of Superannuation Benefits
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Principles for assessing withdrawals from superannuation assets
The income and assets test assessments of a withdrawal from superannuation assets depends on:
- whether the superannuation assets are in the accumulation phase [2] or draw down phase [2], and
- the pensioner's age.
Income and assets assessment of withdrawals in the drawdown phase
A withdrawal made during the drawdown phase is considered to be a commutation. Commutations are assessed under the income streams rules.
More → [65]
Assets test assessment of withdrawals in the accumulation phase
The assets test [2] assessment of a withdrawal from a superannuation fund [2] depends on how the amount withdrawn is used. For example, if invested in bank account it becomes a financial asset [2], if used to pay the mortgage of the principal home [2] it becomes exempt. If the person has not reached preservation age, withdrawal is allowed only on financial hardship or compassionate grounds. It is likely in these cases that there will be no impact as the amount withdrawn would likely be spent on living expenses or similar.
Income test assessment of withdrawals in the accumulation phase
Withdrawals from superannuation in the accumulation phase are not assessed as income.
The accumulation phase is the period during a person's working life in which superannuation contributions are paid into a superannuation fund, with the aim of maximising the sum available for retirement through investment and tax concessions.
The draw down phase is the period, after retirement from the workforce, when a person receives regular payments of superannuation benefits from their superannuation fund or an income stream product.
One element of the means test for income support pensions whereby the rate of pension payable to a pensioner reduces progressively as their assets increase above a certain threshold known as the assets value limit (AVL). [68]
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 [27]):
- 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) [28] of the VEA a financial asset means;
- a financial investment [2], or
- a deprived asset [2]
The principal home has the meaning given by subsection 5LA(1) [28] of the VEA and subsection 5LA(2) [28] of the VEA. The principal home of a person is generally the place in which they reside. In certain circumstances, however, the principal home of a person can be the place in which they formerly resided. The following property is regarded as part of the principal home.
- the residence itself (e.g. house, flat, caravan),
- permanent fixtures (e.g. stoves, built-in heaters, dish-washers, light fittings and affixed carpets),
- [glossary:curtilage:DEF/Curtilage] (i.e. two hectares [2] or less of private land [2] around the home where the private land use test [2] has been satisfied, or all land held on the same title as the person's principal home where the extended land use test [2] has been satisfied), or
- any garage, shed, tennis court or swimming pool used primarily for private purposes provided it is on the same title as the principal home.
Treatment of Non-Pensioner Partner's Superannuation Investments
- Log in [69] to post comments
Assessment of a non-pensioner partner's superannuation investments
Amounts in superannuation funds [2] owned by a non-pensioner partner [2] are exempt from assessment for the pensioner's income support pension [2] until the non-pensioner partner reaches pension age [2], regardless of whether or not the non-pensioner partner claims pension. When the non-pensioner partner reaches pension age their superannuation affects the pensioner's entitlements as follows:
- superannuation investments in the accumulation phase [2] are assessable as a financial investment [2] More [70]
- superannuation investments in the drawdown phase are assessable under the income stream [2] rules. More ? [71]
Assessment of withdrawals re-invested outside superannuation
If a non-pensioner partner invests any withdrawal amounts outside the superannuation environment, the investment is assessed under the usual income and assets test rules applying to that type of investment.
More ? [72]
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 [27]):
- 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.
A person's 'partner' is someone who is a member of a couple with that person.
Income support pension is:
- a social security pension [2]
- a service pension;
- an income support supplement.
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 |
The accumulation phase is the period during a person's working life in which superannuation contributions are paid into a superannuation fund, with the aim of maximising the sum available for retirement through investment and tax concessions.
According to section 5J of the VEA, a financial investment means:
- available money [2],
- deposit money [2],
- a managed investment [2],
- a listed security [2],
- a loan [2] that has not been repaid in full,
- an unlisted public security [2],
- gold, silver or platinum bullion [2],
- an asset tested income stream (short term) [2] ; or
- an asset tested income stream (long term) [2] that is an account‑based pension within the meaning of the Superannuation Industry (Supervision) Regulations 1994; or
- an asset‑tested income stream (long term) that is an annuity (within the meaning of the Superannuation Industry (Supervision) Act 1993) provided under a contract that meets the requirements determined in an instrument under subsection (1G);
but does not include an investment in an FHSA (within the meaning of the First Home Saver Accounts Act 2008) or a designated NDIS amount.
According to subsection 5J(1) of the VEA [28], 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 as life insurance business by a life company registered under section 21 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 [28];
but does not include any of the following:
- available money;
- deposit money;
- a managed investment;
- an investment in a public unit trust;
- an investment in an insurance bond;
- an investment with a friendly society;
- an investment in a superannuation fund;
- an investment in an approved deposit fund;
- an investment in an ATO small superannuation account;
- a listed security;
- a loan that has not been repaid in full;
- an unlisted public security;
- gold, silver or platinum bullion; or
- a payment of compensation in relation to a person's:
- inability to earn, derive or receive income from remunerative work; or
- total and permanent disability or incapacity.
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16549%23comment-form
[2] https://clik.dva.gov.au/%23
[3] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/91-income-and-assets-test-principles
[4] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/95-deeming-provisions
[5] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/101-ordinary-income
[6] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/102-assets
[7] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/105-income-streams
[8] https://clik.dva.gov.au/user/login?destination=node/16317%23comment-form
[9] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn585
[10] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn586
[11] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn587
[12] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn588
[13] http://awsp76:81/sites/default/files/dvaforms/D0563.pdf
[14] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/95-deeming-provisions/957-deemed-income-account-based-income-streams-0
[15] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/105-income-streams/1054-income-and-assets-assessment-income-streams/income-assessment-purchased-income-streams
[16] https://clik.dva.gov.au/book/export/html/16549#tgt-More_ftn1
[17] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/104-superannuation-funds/1042-description-superannuation/what-superannuation
[18] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn585
[19] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/104-superannuation-funds/1042-description-superannuation/types-superannuation-funds
[20] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn586
[21] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/104-superannuation-funds/1043-assessment-superannuation-benefits/early-release-superannuation-benefits
[22] https://clik.dva.gov.au/compensation-and-support-policy-library/part-3-income-support-eligibility/310-financial-hardship
[23] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn587
[24] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/104-superannuation-funds/1043-assessment-superannuation-benefits
[25] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn588
[26] https://clik.dva.gov.au/book/export/html/16549#ref-More_ftn1
[27] http://clik.dva.gov.au/glossary/foreign-superannuation-fund
[28] http://clik.dva.gov.au/legislation-library
[29] http://clik/health-procedure-library/health-information-and-management-notes-himn/vhc/072014-vhc-veterans-home-care
[30] https://clik.dva.gov.au/user/login?destination=node/16484%23comment-form
[31] https://clik.dva.gov.au/user/login?destination=node/16430%23comment-form
[32] https://clik.dva.gov.au/user/login?destination=node/16554%23comment-form
[33] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn589
[34] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/105-income-streams/1055-special-provisions-regarding-self-managed-superannuation-funds-and-small-apra-funds/description-self-managed-superannuation-funds-and-small-apra-funds
[35] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn589
[36] https://clik.dva.gov.au/user/login?destination=node/16506%23comment-form
[37] https://clik.dva.gov.au/user/login?destination=node/16403%23comment-form
[38] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn590
[39] clik://LEGIS/VEA/section 5H(8)
[40] clik://LEGIS/VEA/section 5J(1)
[41] clik://LEGIS/VEA/section 52(1)
[42] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn590
[43] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn591
[44] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn592
[45] clik://LEGIS/VEA/section 52AA
[46] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn592
[47] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn593
[48] clik://LEGIS/VEA/Div 4/Part IIIB
[49] clik://LEGIS/VEA/SubDiv A/Div 11/Part IIIB
[50] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn593
[51] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn594
[52] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn595
[53] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn596
[54] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn591
[55] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn594
[56] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/102-assets/1024-assessing-personal-assets-and-investments/assessing-life-insurance-policies
[57] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn595
[58] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/105-income-streams/1056-special-provisions-regarding-family-law-affected-income-streams
[59] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn596
[60] https://clik.dva.gov.au/user/login?destination=node/16358%23comment-form
[61] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn597
[62] https://clik.dva.gov.au/compensation-and-support-policy-library/part-12-compliance-and-obligations/121-recipient-obligations
[63] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn597
[64] https://clik.dva.gov.au/user/login?destination=node/16535%23comment-form
[65] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn598
[66] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/105-income-streams/1053-general-provisions-assessing-income-streams/additional-rules-regarding-commutation
[67] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn598
[68] http://clik.dva.gov.au/glossary/assets-value-limit-avl
[69] https://clik.dva.gov.au/user/login?destination=node/16428%23comment-form
[70] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn599
[71] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn600
[72] https://clik.dva.gov.au/book/export/html/16549#tgt-cspol_part10_ftn601
[73] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn599
[74] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn600
[75] https://clik.dva.gov.au/book/export/html/16549#ref-cspol_part10_ftn601