Legacy Pension Reform – The Missing Piece
Important Update: Legacy Pension Reform & Your Asset-Test Exempt Income Stream
A crucial update has been issued regarding legacy pensions, clarifying the rules for Asset-Test Exempt (ATE) income streams.
New Guidelines—Social Security (Asset-test Exempt Income Stream Guidelines) Determination 2025—are now in place. These new rules confirm that income streams which had ATE status immediately before the legacy pension reforms began (on 7 December 2024) will retain that status despite now being commutable.
This is a key detail that resolves significant uncertainty for retirees with these products.
The Background: A Conflict in the Rules
Previously, a key feature of ATE pensions (both 100% and 50% exempt) was the requirement that they be non-commutable (i.e., unable to be cashed out). If an ATE pension became commutable, it would immediately lose its asset-test exemption.
When the legacy pension reforms commenced on 7 December 2024, all lifetime, life expectancy, and market-linked pensions suddenly became commutable (until 7 December 2029).
This created a technical problem: because these pensions were now "potentially commutable," they should have immediately lost their ATE status, regardless of whether the owner actually commuted them or not. This would have triggered an automatic reassessment of Age Pension entitlements for many retirees.
What the New Guidelines Fix
Thankfully, the new guidelines (specifically Guideline 21) fix this issue.
The Department of Social Security can now determine that a legacy pension that had ATE status before 7 December 2024 does not lose that status merely because the new reforms make it commutable.
In short: your legacy pension's asset-test exemption is safe, unless you actually commute it.
Only if and when you decide to commute a legacy pension under the new reforms will that pension cease to be an asset-test exempt. This provides much-needed certainty for retirees and ensures that Age Pension entitlements are not automatically impacted by the new reforms.
For further information, or to book an appointment to ensure your business/trust affairs are in order, give Humble Goode Financial a call on 08 7477 8252 or email planning@hgfp.com.au
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