DSS Determination - Maintaining Asset Test Exemption

The Social Security (Asset-test Exempt Income Stream Guidelines) Determination 2025 is a new legislative instrument made under subsections 9A(6), 9B(5), and 9BA(12) of the Social Security Act 1991.

It consolidates and updates previous instruments that governed which superannuation and annuity income streams can be treated as asset-test exempt for social security purposes.

Purpose

The Determination provides guidelines the Secretary (or delegate) must consider when deciding whether a particular income stream is to be treated as asset-test exempt under:

• subsection 9A(5) (lifetime income streams),
• subsection 9B(4) (life expectancy income streams), and
• subsection 9BA(11) (market-linked income streams) of the Social Security Act 1991

Key Features and Updates

1. Consolidation and repeal of earlier instruments
   • Repeals the Asset-test Exempt Income Stream (Lifetime Income Stream Guidelines) Determination 2015 and the Social Security (Guidelines for Determining Whether Income Stream is Asset-test Exempt) Determination 2022.
   • Preserves their effect and merges both into a single, modernised framework.
2. Inclusion of new legacy product guidelines
   • Introduces new provisions enabling the Secretary to maintain asset-test exemption for legacy lifetime, life expectancy, and market-linked pensions that were affected by the Treasury Laws Amendment (Legacy Retirement Product Commutations and Reserves) Regulations 2024.
   • These Treasury Regulations temporarily permit commutations of pre-2007 legacy income streams between 7 December 2024 and 6 December 2029; however, such commutation powers would otherwise breach the “no-commutation” test required for exemption under the Social Security Act.
   • The Determination therefore ensures that legacy income streams that are not commuted retain their exempt status, preventing unintended social-security debts
3. Specific guidelines for various scenarios The Determination contains 21 guideline sections, each covering a specific case where an income stream may remain or become asset-test exempt, including:
   • Public sector and private sector defined-benefit pensions (ss. 6–7).
   • Commutations or rollovers (s. 8–10).
   • Transfers to successor funds (s. 11).
   • Family law-related commutations and splits (ss. 12–13, 18–19).
   • Payments of surcharge or tax debts (ss. 14–15).
   • Hardship withdrawals or fund closures (ss. 16–17, 20).
   • Legacy products affected by the 2024 Treasury Regulations (s. 21)

Policy Rationale

• Supports equitable treatment of retirees by maintaining the intended social security asset-test exemptions for compliant or historic income streams.
• Addresses an unintended policy consequence where Treasury’s 2024 reforms could have caused older, uncommuted pensions to lose exemption status.
• Avoids the creation of social security debts for individuals who do not commute their legacy pensions.

Commencement and Authority

• Commencement: The day after registration on the Federal Register of Legislation (29 September 2025).
• Authority: Subsections 9A(6), 9B(5), and 9BA(12) of the Social Security Act 1991.
• Subject to disallowance under the Legislation Act 2003.

Summary

In essence, this 2025 Determination:

• Replaces and consolidates prior asset-test exemption guidelines.
• Ensures continuity of asset-test exemptions for eligible legacy pensions.
• Prevents unfair loss of benefits due to regulatory changes allowing commutations.
• Modernises and clarifies the Secretary’s decision-making framework under the Social Security Act 1991.

It is therefore a critical companion to the Treasury Laws Amendment (Legacy Retirement Product Commutations and Reserves) Regulations 2024, aligning social security treatment with the broader superannuation reform framework.