Superannuation, Age Pension, combining super with Age Pension, centrelink

 Super is a hot topic right now, with everyone seemingly having an opinion on what is the ideal amount to live on in retirement – and how to encourage this in an equitable way.


While most of us are unable to influence the financial policy makers, our best tactic is to ensure we are using all the rules and concessions to our own best advantage.


Today in Part Two of our special series on superannuation, we look at how it works alongside the Age Pension, during accumulation, decumulation and if one of a couple is a younger spouse. 

We start with the top level rules which apply during accumulation, and then decumulation. Next we share the story of Kumar and Carol which shows how a simple ‘roll-back’ from pension mode to accumulation can result in an extra $15,000 of income from an Age Pension.

Super during accumulation


Accumulation mode is the stage when you are building your retirement nest egg and typically before you reach Preservation Age (typically 60). In accumulation mode your super is paid into your fund by an employer, or yourself in the form of salary sacrifice or voluntary contributions. This is essentially a ‘savings’ phase and all savings in your fund are taxed at 15% on earnings during this time.


There are caps on the amount you can put into super during accumulation. These caps are contribution caps and apply to money from the mandatory Super Guarantee as well as extra contributions as noted above. At some stage, depending upon the trigger, your account will need to be switched to decumulation phase. This is when you start to spend that nest egg and is most commonly achieved by starting an Account-Based Pension.


Super during decumulation


You can switch to decumulation mode as soon as you reach Preservation Age if you wish to move your super to an income stream such an account based (or other type) of pension. Once your account is in an income stream, no taxation will be payable on the earnings.

There are also Transfer Balance Caps on the amount that can be put into an Account Based Pension – currently $1.7 million, but due to be lifted (owing to inflation) to $1.9 million on 1 July 2023.


There are also special downsizer contributions and bring forward rules which allow retirees to shift significant sums into their super without penalty, as long as they comply with the specific rules for these contributions attached to the sale of a family home or one-off transfers within a specific time limit. We explained both the Downsizer Contributions and the Bring Forward rules recently, so you can refer to the full detail using these links.


Age Pension rules and your super income streams:


How do the younger spouse rules work?


Did you know that superannuation and income streams are not treated equally in your Age Pension application?  

Could this work for you?

Our advice team recently assisted a couple – Kumar and Carol –  who were able to access Age Pension payments after a meeting in which they discovered the rules on how superannuation is assessed.

They had already both left work, were under Age Pension age, and preparing for their Age Pension options at application time, which was within a few months for Carol. Kumar had another two years to go.

They had also both already converted their superannuation lump sums into Account-Based Pensions, providing income payments to cover retirement expenses, while they were too young to qualify for Age Pension.

As Carol is now approaching Age Pension age, while Kumar has two years to go there is the opportunity to take advantage of the eligible partner’s Centrelink rules.

Carol’s superannuation income stream balance is anticipated to reach zero before this time. Kumar’s super is also paying an income stream. Between them, they have approximately $840,000 in investments inside super, plus some additional assets (cash in the bank, car and household contents) totalling assets of just over $1,000,000. This exceeds the Asset Test Threshold for a Homeowner Couple Combined. 


This means they will not currently qualify for any Age Pension, at all. Instead, they will qualify for a Commonwealth Seniors Health Card (CSHC), which is a valuable discount card but provides no income payments. They will therefore need to use more of their own money to cover their retirement living expenses.

What are their options?

As Kumar has two years before reaching Age Pension age, we explained how superannuation is exempt as an asset (and also not ‘deemed’) under Age Pension age, unless an income stream commences.

We next explained how there was a  simple option to restructure their financial assets in a way which maximises Carol’s ability to become eligible for the highest possible Age Pension payment. Here’s how it works:

Under Age Pension age Superannuation (Accumulation) Account Based Pension
Consequence: Exempt from Assets & Income Test Assessable and ‘deemed’

We started by using the Retirement Essentials eligibility calculator which showed no Age Pension eligibility based upon their current financial assets, but the possibility of receiving a Commonwealth Seniors Health Card instead.

How we helped: 

We explained how it is possible to roll an Account-Based Pension back into the accumulation phase of superannuation, which is an exempt asset if the holder is under Age Pension age. It is important to note that there is a trade-off in this regard involving re-instated tax on investment earnings inside the super fund balance. However, using the calculator, we demonstrated the significant difference this makes to Carol’s Age Pension entitlements and their overall household income.

Our calculators showed a major difference between:  

    • how they were currently invested in superannuation which provides an income stream, and
    • the comparison of what it would look like by restructuring their assets to benefit from Centrelink treatment of exempt assets.


Kumar and Carol have now achieved a significant improvement in their financial position, in particular, their household income. They have moved from not being eligible at all for an Age Pension (and only a Commonwealth Seniors Health Card instead), to being entitled to receive full Age Pension for Carol once she reaches Age Pension age in a few months. That’s a $20,119 per year improvement, (or $774 per fortnight increase) to their household income, until the Kumar also reaches Age Pension age in two years’ time. At this point their eligibility will be reviewed as his superannuation will then become assessable.

Kumar and Carol’s eligibility became possible because they were willing to plan ahead and structure their financial assets and – most importantly – take advantage of Centrelink’s Assets Test treatment of superannuation.

Do you need help to understand more about combining super and Age Pension strategies? Let us step you through the consequences of what this means for your household income during a consultation as we did with Kumar and Carol.


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