Assessing superannuation 108-05070000

Most customers who have been recently employed should have some superannuation.

Money is contributed by employers, employees, or self-employed individuals into superannuation funds. The period during which this happens is known as the accumulation phase. It happens during a person's working life.

Superannuation is a long term investment. It is the main way most people save for their retirement. There are different types of superannuation investments. Staff must not confuse these with income stream products, such as annuities or superannuation pensions. For details, see Social Security Guide 4.8.2.10 Principles for assessing superannuation investments.

A person can, on retirement:

• keep superannuation money in a superannuation investment
• use the money to start an income stream, or
• withdraw the funds

The Resources page contains a link to the Australian Taxation Office (ATO) website about what is superannuation.

Customers can set up their own superannuation funds. These are known as:

• self-managed superannuation funds (SMSF)
• small Australian Prudential Regulation Authority (APRA) funds (SAF)

Staff can identify most of these by name. They will often include the customer’s family name.

An SMSF:

• can have up to 6 members
• has all members as trustees of the superannuation fund or directors of the trustee company if a corporate trustee exists
• is regulated by the ATO

An SAF:

• can have up to 6 members
• has a corporate trustee who is approved by APRA
• is regulated by APRA

SMSFs and SAFs must comply with the Superannuation Industry Supervision (SIS) Regulations. If not, it is:

• considered a private trust
• assessed under the trust and company rules

For more details, see the definition of a superannuation fund in the Social Security Guide 4.8.1.20.

Unallocated reserves

SMSFs or SAFs may have reserves set aside in the fund. These reserves:

• are known as unallocated reserves, that is, they are not part of any individual member's superannuation interest in the fund
• have different names, commonly including:
• investment reserve
• miscellaneous
• general reserve

Overseas superannuation-like investments do not meet the definition of a superannuation fund under Section 9(1) of the Social Security Act.

If a person:

• can access the funds, treat these as overseas managed investments
• cannot access the funds, such as they do not meet a condition of release, do not assess the asset value as a managed investment

For more details, see Foreign income and assets.

Splitting superannuation refers to the process of dividing superannuation contributions between partners, typically during separation or divorce.

From 28 December 2002, laws under the Family Court allow:

• the division of superannuation between partners
• a 'flag' to superannuation interest for future splitting - where the decision has been deferred to a future date and funds may be frozen

Superannuation splits have no effect on income support entitlements:

• until the customer reaches Age Pension age, or
• where an income stream has commenced

Staff must update details in the usual manner, if a customer:

• is of Age Pension age
• changed superannuation details

The Department of Social Services (DSS) does all Means Test assessments of ‘split’ income stream payments. See Adding or updating an account-based income stream for more information.

A person can generally access their superannuation:

• at or after preservation age, and
• after retirement from the workforce, or
• when they have reached the age of 65 (even if they are still working)

A person can:

• make lump sum withdrawals, and/or
• convert part or all their investment into regular ongoing payments from an income stream product. E.g. superannuation pensions or annuities. This is commonly known as the draw down phase

A person can move from retirement (draw down phase) back into employment (accumulation phase).

Where a person uses superannuation assets to purchase or to start an income stream, it is assessed under the income stream rules.

In some cases, a person can apply for an early release of their superannuation. See Early release of superannuation on financial hardship grounds.

Lump sum withdrawals are not assessed as income. However, further assessment may apply. If the customer uses the lump sum to buy an assessable asset, the relevant income and asset assessment applies. E.g., if monies are put in a bank account, the account balance is an asset and subject to deeming. See Coding income and assets for Centrelink payments and services.

Customers may receive a range of benefits paid through different policies because of:

• sickness
• injury
• temporary or permanent incapacity

These benefits may be paid through:

• a superannuation fund
• an insurance company
• a customer’s employer

For more details, see Income from personal injury insurance schemes and disability benefits.

If a member is paid a Total and Permanent Disability (TPD) benefit as:

• an one-off lump sum payment, it is treated as a lump sum withdrawal from the superannuation fund
• an invalidity lifetime pension from a defined benefit fund, it is assessed as a defined benefit income stream

The superannuation fund may make a superannuation contribution to the member's account at the same time as the regular ongoing payments, if needed under the Superannuation Guarantee. These superannuation contributions are not assessed as income.

For FTB and CCS, benefits released from superannuation are generally:

• taxable income
• included in the customer's estimate

To minimise a customer getting an overpayment during reconciliation, staff must:

• check if the customer needs to revise their current family assistance income estimate
• tell the customer what choices are available. See Family Tax Benefit (FTB) claim options and payment choices

Customers and/or partners at or over Age Pension age:

• All superannuation investments are assessed under the income and assets tests. For a member of a couple, this includes superannuation owned by a partner who does not get an income support payment. Note: for Commonwealth Seniors Health Card (CSHC), the income test does not include deeming of superannuation investments in accumulation stage. See Commonwealth Seniors Health Card (CSHC) income test and reference tax year
• Superannuation is:
• assessed under deeming provisions
• coded as a managed investment
• Downsizer contributions from the sale of a customer's principal home that are not intended for the purchase of a new principal home are:
• recorded as superannuation
• assessed under the income and assets tests
• If the owner of the superannuation is prevented from accessing their fund because of the rules of the fund, the Minister for the Department of Social Services (DSS) has the delegation to exempt superannuation investments where certain conditions are met, see Exempting superannuation investments

Customers and/or partners under Age Pension age:

• A superannuation pension or income stream is assessable under income and asset tests. For a member of a couple, this includes income streams received by a partner who does not get an income support payment (ISP)
• Australian superannuation investments not being used to receive a pension or income stream are exempt under the income and assets tests. Staff must not get or record details about these unless the superannuation owner is in 13 weeks of reaching Age Pension age
• If the customer says their assessable assets are less because the customer has moved money into superannuation:
• ask to see proof. Do not code any of the superannuation details
• record on a DOC saying the money has now been invested in superannuation