Three Questions Worth Asking About Your Super

The card sits alongside the pensioner card in the concession system, and its central design feature is that it exists for people who don't get the Age Pension. It is income-tested, not assets-tested — the reverse of what most self-funded households expect — and the thresholds have been indexed year on year, sitting well above what many retirees actually receive. A household drawing an account-based pension, with little assessable income outside super, can find itself under the threshold without ever realising it was close.

The four gates

Three are straightforward. You must have reached Age Pension age, which is 67 for anyone born on or after 1 January 1957. You must be an Australian citizen, permanent resident or Special Category Visa holder residing in Australia. And you must not be receiving the Age Pension or another qualifying payment — the card is designed to fill precisely that gap. The fourth gate is the income test, and that's where the planning conversation sits.

How the income test works

It combines "adjusted taxable income" with deemed income from account-based pensions. Adjusted taxable income starts with your taxable income and adds back items that would otherwise reduce it: reportable fringe benefits, reportable employer super contributions, total net investment losses such as negative gearing, certain tax-free pensions, and foreign income not otherwise counted. Its purpose is to stop someone reducing assessable income through structural arrangements while retaining substantial economic capacity.

Layered on top is deeming. Rather than counting what you actually withdraw, Services Australia assumes your pension balance earns income at set rates and adds that to the figure.

Grandfathering of pre-2015 pensions

Deeming applies to account-based pensions purchased or changed on or after 1 January 2015, and to any pension held by someone granted a card after 31 December 2014. Pensions predating both dates, held by long-standing cardholders, are grandfathered — deeming doesn't apply, and only actual drawings count. Since those drawings are tax-free after 60 and don't appear in adjusted taxable income, the pension effectively drops out of the test altogether.

Two retirees with identical $900,000 balances drawing the minimum can face very different assessments depending on whether the pension began before or after January 2015. In finely balanced cases, a two-month difference in start date decides eligibility. Grandfathering is also fragile: most restructures involving commuting and recommencing a pension lose it permanently, so it's worth advice before making a change rather than after.

Couples, and what catches people out

The card is issued per person, but couples are assessed on combined income. Where one partner has retired and the other is still working, that working income counts — so a household can lose eligibility on the strength of a salary the retired partner never thought to check against the test.

The moment that catches surviving spouses is the shift from couple to single after a partner's death. The threshold drops from the couple rate to the single rate, and where the survivor's own income sits between the two, the card can be lost even though their income hasn't changed at all.

What the card is actually worth

Federally, the anchors are the PBS concessional co-payment and the PBS Safety Net. The concessional co-payment sits at $7.70 per script against a general co-payment of $25.00 from 1 January 2026 — a direct saving of $17.30 on every PBS medicine filled. The Safety Net threshold also drops sharply for cardholders, so the point at which further prescriptions become free arrives much sooner.

State and territory concessions are where total value tips higher, and where it varies most — ambulance cover, energy rebates, vehicle registration, public transport and council rates all differ by jurisdiction. Cardholders in Sydney, Melbourne, Brisbane and Adelaide hold practically different cards despite identical plastic. Concessions change regularly and should be confirmed with your state authority.

Routed through the estate instead, it's around 15 per cent, or $96,000. Either way, tens of thousands of dollars the parents assumed were being passed on aren't. That gap is what this article is about — not the mechanics of a tax bill after the fact, but the decisions available now that change what actually flows through.

What the tax actually is

Death benefits are taxed by reference to two things: the components inside the account, and the status of the person receiving them. The tax-free component passes to any beneficiary tax-free. Where the recipient is a death benefits dependant, the whole payment is tax-free regardless of components. Where they aren't, the taxable-taxed element is taxed at a maximum of 15 per cent plus the Medicare levy where applicable.

The levy turns on the payment route. Paid directly to a non-dependant, it applies and the effective rate sits at 17 per cent. Paid to the legal personal representative for distribution through the estate, no levy is deducted and the rate is 15 per cent. Two percentage points is real money on a substantial balance — though money passing through an estate is exposed to creditors and family provision claims in a way a binding nomination isn't.

The dependant definition

Under section 302-195 of the Income Tax Assessment Act 1997, a death benefits dependant covers only four categories: a spouse or former spouse including de facto, a child under 18, someone in an interdependency relationship at the time of death, and someone financially dependent at the time of death.

The most common assumption to get wrong is that beneficiaries under a Will inherit as tax dependants. They don't — being named in a Will has no bearing on the tax classification, and financially independent adult children sit almost always outside the category. An interdependency relationship requires four elements present at the time of death, and the ATO has said repeatedly that the required close personal relationship would not normally exist between a parent and an adult child.

Recontribution, and why the mechanics matter

The idea is simple: withdraw a lump sum, which carries tax-free and taxable components in the same proportion as the account holds them, then recontribute it as a non-concessional contribution — which becomes tax-free component.

The gates are real. The withdrawal generally requires a condition of release with unrestricted access, which for most retirees means being 60 and retired, or having reached 65. The recontribution must fit within the non-concessional cap — $130,000 in 2026–27, or up to $390,000 under the bring-forward rules for those under 75 with a total super balance below the relevant threshold — and requires a balance at the prior 30 June below the general transfer balance cap of $2.1 million.

Where the recontribution is significant, the tax-free money is usually kept in a separate super interest, contributed to a separate accumulation account before a pension commences from it so the new pension crystallises at 100 per cent tax-free component. Blending it into an existing balance that already holds taxable component defeats the exercise.

When it doesn't apply

For a substantial share of readers, this describes a problem they don't have. Where a surviving spouse takes the benefit and draws it down through their own retirement — spending it, meeting care costs, funding residential care — there may be very little super left when the second death occurs. The tax rate on nothing is nothing.

The difficulty is that the strategies work best set up years before they're needed, at a stage when the household doesn't yet know how much super will actually reach the next generation. That's the conversation worth having — not the rule, but the balance of probabilities and the timing of the levers against your own likely path through retirement.