Centrelink Changes – January 2016

Changes

From January 2016, Centrelink will be changing the way in which they assess Defined Benefit pensions.

What is a Defined Benefit?

A Defined Benefit income stream is a pension paid from a public sector or other corporate Defined Benefit Superannuation Fund where the pension generally reflects years of service and final salary.

Current Situation

The income Centrelink assess from Defined Benefit income streams may be reduced by the tax free component known as a deductible amount.  This is automatically applied by Centrelink in determining your Centrelink entitlement.

What is the change?

From January 2016 Centrelink will limit the tax free component to a maximum of 10%.

How may this impact you?

Under the Income Test Centrelink will assess more of your Defined Benefit pension if your current tax free component is more than 10%.  Should you be limited by the Income Test you will see a reduction to your Centrelink entitlement.

What do you need to do?

There is nothing you need to do.  Centrelink will automatically update your Defined Benefit details and adjust your Centrelink entitlement accordingly.

Practical Example

Don receives $770 per fortnight from a Defined Benefit pension scheme.  His tax free amount is 40% therefore Centrelink only assess $462 under the income test.   From January 2016, Don would be assessed as receiving $700 per fortnight because the maximum tax free component is 10%.

Please note this is general advice only and you should consult a professional financial adviser to apply these change to your personal circumstances.