Can I withdraw my pension as a lump sum to lower my income below the Commonwealth Seniors Health Card threshold and live off that sum?

Feb 03, 2025

Question: I retired in January last year at the age of 70 and my wife, now aged 68 retired more than ten years ago. We have been living off an account-based pension that was started before January 2015, so I think almost none of the income is counted. A Centrelink assessment four years ago indicated that we would not be eligible for a pension because my wife and I were about $90,000 over the asset test limit. I still have remaining balances in two super funds as well as bank savings earning a small amount of interest. Because of the increased draw-down rate, my existing ABP will cease at the end of the year.

I want to apply for a Commonwealth Seniors Health Card to help ease the costs of medicine. Can I withdraw my allocated pension money as a lump sum now to lower my income level below the upper income threshold? We could then slowly draw-down the lump sum amount and live off that for a while.

I think you should first consider applying for an aged pension as there may be some confusion with the complicated rules that apply.

You indicated that you were previously ineligible because you exceeded the asset test. Since that time, the upper asset test thresholds have increased on at least nine occasions and with your existing ABP about to run out, it is highly likely that you may already be under the upper thresholds to qualify for a part age-pension.

For a home owning couple, that limit is now $1,045,000 which excludes the value of your home and for a non-homeowner, the limit increased to the current level of $1,297,500.

*Note that these figures will increase further in March.

When you last enquired in 2021, the limits for home-owning couples were $891,500 and none home owners $1,008,000.

The actual income you regularly draw from the ABP is ignored under Centrelink’s income test. While you make mention of your pre 2015 ABP, you may be confused how special “grandfathered” rules apply. The special income test treatment would only apply if, on January 1, 2015 you had an ABP AND you were receiving a Centrelink income support payment at the time. Based on your age, you would not have been old enough to claim an Age Pension anyway, so it is highly likely that the special rules could never have applied to you.

Withdrawing the ABP will have no effect on reducing Centrelink assessable assets until you spend the money. That’s because you are simply shifting it from one assessable asset, the ABP, to another assessable asset, your bank account.

In any event, from the information provided, you are already eligible for the Commonwealth Seniors Health Card. That card is not asset-tested and unless you or your partner have other taxable income not mentioned here, you are well under the couple’s $ 158,440 a year threshold to qualify.

Remember that any withdrawals or payments from Superannuation based funds, including an ABP are ignored for both tax and Centrelink purposes. The only income that would be assessed for the Commonwealth Seniors Health card income test is the small amount of bank interest you earn.

For more finance related questions, learn more here.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.

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