Important Centrelink changes that could impact your Account Based Pension

msi - centrelink account based pensions1By Aaron McCracken, McKinley Plowman & Associates, Accountants, Perth. 

Commencing from 1 January 2015 Account Based Pensions (ABP) will be treated the same way as other financial assets such as cash, shares and investments and be deemed, which may result in a reduction of the age pension for your clients.

Deeming rates applying from 1 July 2014 are 2% on the first $48,000 of financial assets for a single and $79,600 for a couple and 3.5% over this threshold.


ABP’s commenced prior to 1 January 2015 will continue with the same income test treatment, provided:

The recipient was receiving an income support payment form Centrelink/DVA before this day, and

Since that day, the person has been continuously receiving the payment.

Grandfathering also applies to ABP’s that later convert to a reversionary beneficiary on the death of the original owner, provided the reversionary beneficiary is receiving an eligible income support payment at the time of the conversion.

Strategies to consider prior to 1 January 2015

Time is of the essence, but you may consider the following:

Rollover to the most appropriate fund for the long term

  • Review the existing fund or funds, amalgamate and consider rolling over to better suited fund for the longer term

Commute and commence an ABP to lock in a higher deductible amount

  • The deductible amount will increase where there has been an increase in the account value and/or a reduction of the clients life expectancy, leaving less income assessed under the Centrelink income test.

Consider adding a reversionary beneficiary to prolong grandfathering

  • The decision usually requires full commutation and commencement of a new ABP. There may a trade off between an immediate reduction in the deductible amount in exchange for a possible longer term benefit in the form of a higher age pension.

Importantly, clients should seek personal financial advice about how these changes will impact you, as you may need to act soon to put the right strategies in place prior to 1 January 2015.

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