Defined benefit income streams
On this page
- What is a defined benefit income stream?
- How does Centrelink assess income received from defined benefit income streams?
- What is a deductible amount and how is it changing from 1 July 2007?
- What documentation should be provided to Centrelink?
- How do I find out more?
What is a defined benefit income stream?
A defined benefit income stream for social security purposes is a pension paid from a public sector or private sector corporate defined benefit superannuation fund or scheme, such as Comsuper and State Super pensions.
It does not include income streams purchased from:
- retail providers, such as AMP or ING
- self managed superannuation funds or small Australian Prudential Regulation Authority (APRA) funds.
Payments from a defined benefit income stream are determined by factors such as your age, your salary at retirement, your period of service with the organisation(s) and other criteria specified in the governing rules of the scheme. Payments are not defined solely by the amount of accumulated superannuation funds you used to purchase the income stream.
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How does Centrelink assess income received from defined benefit income streams?
The gross income you receive from a defined benefit income stream may affect your Centrelink payment.
Centrelink will reduce the gross income received by any amount that you could claim as a tax deduction. This is known as a deductible amount and can be used for Centrelink purposes even if you don't actually claim it for tax purposes.
For example, if you are entitled to a deductible amount but are not required to pay tax, this deductible amount will still apply.
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What is a deductible amount and how is it changing from 1 July 2007?
Prior to 1 July 2007, the deductible amount was based on the Undeducted Purchase Price (UPP) under tax law.
Following the introduction of the Better Super reforms on 1 July 2007, the deductible amount will now be equal to the 'Tax Free Component' of the income stream under tax law, as calculated by your superannuation fund. The formula used to calculate the deductible amount has changed for defined benefit income streams commencing after 1 July 2007 and also for some existing defined benefit income streams.
The new rules will only apply if this does not result in a decrease to your Centrelink payment. If at 1 July you were a Centrelink customer, 60 or over (or turned 60 whilst on a Centrelink payment) with a defined benefit income stream that is assessed using the deductible amount calculation under the UPP rules, Centrelink will now assess you according to the method that gives you the best payment outcome.
If the new calculation of the deductible amount would result in a decrease to your Centrelink payment, Centrelink will keep the old deductible amount based on the UPP that was used in the previous assessment of your defined benefit income stream.
If you make a partial commutation of your income stream the new rules will apply.
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What documentation should be provided to Centrelink?
If you are an existing Centrelink customer and start receiving a defined benefit income stream or you are a new Centrelink customer and have an existing defined benefit income stream, you will need to provide Centrelink with a schedule giving details of the income stream. This schedule should be completed by the income stream provider (superannuation fund).
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How do I find out more?
For more information on income streams, you can:
- contact your nearest Centrelink Customer Service Centre
- go to Financial Information Services
- view the Retirement Income Streams publication at the Department of Families, Housing, Community Services and Indigenous Affairs website.