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Assets or income test: which one applies?

Find out whether the Centrelink assets test or income test will determine your client’s Age Pension entitlements

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Did you know?

In February 2019 the Government passed new law that changed the means testing rules for certain lifetime retirement income streams (super and non-super lifetime pensions and annuities) commenced on or after 1 July 2019.

These rules were designed to encourage the use of certain lifetime income streams which feature payments for life, irrespective of how long a person may live, and reducing access to capital over life expectancy. These rules can provide what can be attractive means testing outcomes for investors.

It is important to understand that the rules only apply to an investment in a lifetime income stream made on or after 1 July 2019. The rules do not apply to account-based pensions or term income streams (including term annuities). Also, for any lifetime income stream investment made before 1 July 2019 the previous rules (known as the “deduction amount” rules) will continue to apply and can also provide attractive outcomes.


For lifetime income streams that commence on or after 1 July 2019 the new rules will generally assess:

  • 60% of the purchase price of the lifetime income stream until age 84, subject to a minimum of 5 years; and
  • 30% of the purchase price thereafter.

This concessional assessment can be attractive compared to alternate investment structures where 100% of any asset is assessable. Where a client’s Age Pension is being reduced because of the assets test, an investment in a lifetime income stream subject to this assessment could immediately improve their Age Pension eligibility.


Important notes: Age Pension benefits described above will not apply to all individuals. Age Pension outcomes depend on an individual (or couple’s) personal circumstances and may change over time. While lifetime income streams may immediately benefit some Age Pension eligible retirees who are assessed under the assets test, in later years, if assessed under the income test, any ongoing Age Pension benefits may be reduced.