Financial advisers recommending clients report any falls in the balance of an account-based pension (ABP) to Centrelink should not forget this advice is applicable to SMSF members but they will need to recognise it using different mechanisms, a superannuation specialist has noted.
CFS head of technical services Craig Day said recent volatility in the share market due to the introduction of tariffs by the US government may have resulted in pension balances falling enabling retiree clients the ability to receive a larger age pension amount.
“Reporting reduced ABP balances to Centrelink is something you might want to do if your clients are going to be impacted by the loss of age pension because of an increase in deeming rate or due to market volatility,” Day told advisers in a recent technical briefing.
He noted the Australian Securities Exchange peaked on 14 February and reached its most recent low point, a fall of 14 per cent, on 8 April following the announcement of the US tariffs.
“If I’ve got a client in an ABP [with a valuation of $340,000], they’re probably not fully invested in the ASX 200,” he added.
“They’re going to be invested in a mix of different assets, so let’s assume a drop there of 7.5 per cent and so the pension value is dropping from $340,000 down to $314,000.
“If I report that reduction through to Centrelink that would result in an extra $73 per fortnight age pension until I’m reassessed again in August.”
According to Day reporting reduced pension balances was something a member of an Australian Prudential Regulatory Authority regulated fund could do between the fund’s own updates in February and August each year via myGov or by contacting Centrelink and provide an income stream schedule.
He highlighted that SMSF members could also do the same as many of them would be eligible for the age pension.
“Some people say ‘SMSF client are not age pension clients’ but yes, they are,” he expained.
“You can have assets these days of over a million dollars [to qualify for the age pension] and the average SMSF has assets less than that for the total fund.
“The average SMSF also has two people in it, so there’s plenty of people with SMSFs who have qualified for the age pension but the important thing to understand is they do not report electronically.
“In this situation, the ABP information is requested once a year in August but you can report reduced balances at other times and provide a Centrelink income stream schedule, and the accounting software can produce that schedule for you.
“It is also important to understand to do that the administrator will create an interim set of accounts to bring the ABP value up to its current value, taking into account investment returns which may come at an additional cost.”
