Since 1 July 2019, lifetime annuities compliant with the capital access schedule have only 60% of purchase price assessed under the assets test, dropping to 30% from age 84 — down from full assessment beforehand. For a retiree near the assets test threshold, a $300,000 qualifying annuity can lift pension by roughly $9,360 a year. Products with guaranteed withdrawal features often don't qualify, so compliance must be confirmed.
When Australians think about managing their Age Pension assets test exposure, the conversation usually centres on gifting rules, what counts as an asset, and how superannuation account-based pensions are treated. Lifetime annuities — and the partial assets test exemption introduced in 2019 — rarely come up, despite producing a measurable and ongoing Centrelink benefit for retirees in the right position. For clients approaching retirement with a balance that puts them near the assets test threshold, understanding what the 2019 reforms changed is worthwhile.
What did the 2019 reforms introduce?
Before 1 July 2019, lifetime annuities were generally fully assessable for the Age Pension assets test — the full purchase price counted as an asset. The 2019 retirement income reforms introduced a partial exemption for lifetime income streams and deferred lifetime income streams purchased on or after that date, provided the product complies with the capital access schedule prescribed under the framework (FirstTech Strategy Matrix 2025-26, section 3.2).
Under the current framework: 60% of the purchase price is assessed as an asset until the day before the recipient's 84th birthday (the "threshold day"). From the 84th birthday onward, only 30% of the purchase price is assessable for the remaining duration of the lifetime income stream (DSS Social Security Guide 4.9.3.35, https://guides.dss.gov.au/social-security-guide/4/9/3/35; FirstTech Strategy Matrix 2025-26). The two-step structure is deliberate: the 60% initial concession aligns with the rough capital portion that can in principle be accessed (or refunded on death within early years); the post-84 reduction to 30% reflects that, by that age, the income-stream character increasingly dominates over residual capital value.
A similar partial exemption applies under the income test via a deductible amount, reducing the portion of income payments that is counted as assessable income.
What does capital access schedule compliance mean in practice?
The exemption does not apply automatically to all lifetime annuities. The product must comply with the prescribed capital access schedule, which is a set of rules limiting how much capital can be withdrawn at different ages. Certain lifetime annuity products purchased on or after 1 July 2019 that include a guaranteed withdrawal feature do not comply with the capital access schedule. These products do not receive the 40% reduction under the assets test (FirstTech Strategy Matrix 2025-26). When considering a lifetime income product for its Centrelink treatment, confirming capital access schedule compliance specifically is essential — it is not safe to assume all lifetime products qualify.
Products that may qualify include immediate lifetime annuities, deferred lifetime annuities, and lifetime pension products offered by certain superannuation funds. Each product must be assessed against the criteria — the product's PDS or the issuer should confirm compliance status.
What is the exemption worth in pension terms?
The practical value of the exemption depends on where the client sits relative to the assets test threshold. For the assets test, the taper rate is $3 of pension reduced per fortnight for every $1,000 of assessable assets above the threshold (DSS Guide 4.2.3). This means every $10,000 of assets test reduction produces $30 per fortnight — $780 per year — in additional Age Pension.
For a retiree who uses $300,000 to purchase a qualifying lifetime annuity: without the exemption, $300,000 would be fully assessed; with the exemption, $180,000 is assessed (60%) and $120,000 is exempt. The $120,000 reduction in assessable assets translates to $360 per fortnight — approximately $9,360 per year — in pension uplift, for as long as the exemption applies. If the assessable portion subsequently reduces to 30%, the annual pension benefit of the exemption increases further.
This is material money. For retirees who are slightly above the assets test threshold — currently $722,000 for a single homeowner or $1,085,000 for a homeowner couple (as at 20 March 2026) — a $300,000 lifetime annuity purchase could shift them into full or part-pension territory.
What is the timing advantage of deferred lifetime annuities?
A deferred lifetime annuity (DLA) is a variant where the purchase is made at or near retirement, but income payments do not commence until a later age — commonly 80 or 85. The practical logic is to purchase longevity insurance early, while health and pricing are most favourable, and then draw on an account-based pension for the intervening years.
The assets test exemption applies from the date of purchase, not from the date payments commence. A DLA purchased at 65 with payments commencing at 85 receives the 60% assessed / 40% exempt treatment from day one. This means the Centrelink benefit runs through the entire pre-commencement period, not just the period when the annuity is paying. For retirees with longevity concerns — family history, good health at retirement — the combination of longevity protection and early Centrelink benefit can make DLAs worth serious consideration.
What trade-offs don't disappear with the exemption?
The assets test exemption is a real benefit, but it doesn't eliminate the structural trade-offs inherent in lifetime annuities. Capital is committed; the purchase price is generally not recoverable. Income is fixed (or limited in adjustability) and inflation risk applies over a multi-decade horizon. There is ongoing counterparty exposure to the issuer. Death earlier than life expectancy means the annuity paid out less than an account-based alternative would have. Estate flow is reduced. None of these are reasons to avoid lifetime annuities categorically — but they are real considerations that should be discussed openly.
The exemption makes lifetime annuities more attractive for retirees near the assets test threshold. For retirees well below the threshold, the Centrelink benefit is limited and the other trade-offs carry more weight.
Who should be thinking about lifetime income products?
Retirees most likely to benefit from exploring lifetime income products include those approaching or sitting just above the assets test threshold, those with genuine longevity concerns, and those who already have sufficient liquidity elsewhere to absorb the capital commitment. Retirees who prioritise estate flow, have limited overall assets, or may need flexibility for large unexpected expenses are less likely to find lifetime annuities appropriate regardless of the Centrelink treatment.
For clients in or approaching retirement, a specific review of where their assets test exposure sits — and whether a qualifying lifetime income product would produce a net benefit — is worthwhile. The income and assets test interactions are complex enough that specialist advice or a direct conversation with Services Australia is recommended before acting.
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Key takeaways
- Since 1 July 2019, lifetime annuities and deferred lifetime annuities that comply with the prescribed capital access schedule have only 60% of their purchase price assessed as an asset until the day before the recipient's 84th birthday, dropping to 30% from that point on — before the reform, the full purchase price was assessed.
- The exemption isn't automatic — products with a guaranteed withdrawal feature generally don't comply with the capital access schedule and receive no reduction, so compliance must be confirmed for each specific product via its PDS or the issuer.
- At the standard $3-per-$1,000 taper rate, a $300,000 qualifying lifetime annuity purchase reduces assessable assets by $120,000 (the exempt 40%), producing roughly $360/fortnight (about $9,360/year) of additional Age Pension for a retiree near the threshold.
- A deferred lifetime annuity's assets test exemption applies from the date of purchase, not from when payments begin — so a DLA bought at 65 with payments starting at 85 gets the favourable treatment for the entire 20-year deferral period, not just once it starts paying.
- The exemption is most valuable for retirees sitting near the assets test threshold with genuine longevity concerns and sufficient other liquidity — for those well below the threshold, or who prioritise estate flow and flexibility, the annuity's structural trade-offs (committed capital, fixed income, counterparty exposure) carry more weight than the Centrelink benefit.
Frequently asked questions
How much of a lifetime annuity counts toward the Age Pension assets test?
For products that comply with the capital access schedule and were purchased on or after 1 July 2019, 60% of the purchase price is assessed as an asset until the day before the recipient's 84th birthday, dropping to just 30% from that point on for the rest of the income stream. Before the 2019 reforms, the full purchase price of a lifetime annuity was assessed.
Do all lifetime annuities qualify for the assets test exemption?
No. The product must comply with the prescribed capital access schedule, a set of rules limiting how much capital can be withdrawn at different ages. Products with a guaranteed withdrawal feature typically don't comply and receive no exemption — they remain fully assessed. It's essential to confirm compliance for each specific product via its Product Disclosure Statement or directly with the issuer, rather than assuming any lifetime annuity qualifies.
How much extra Age Pension can the annuity assets test exemption produce?
At the standard taper rate of $3 reduction per fortnight per $1,000 of assessable assets, a retiree who purchases a $300,000 qualifying lifetime annuity has $120,000 (the exempt 40%) removed from their assessable assets, producing roughly $360 per fortnight — about $9,360 a year — in additional pension for as long as the exemption applies. The benefit is largest for retirees sitting just above the assets test threshold.
Does a deferred lifetime annuity get the assets test exemption before it starts paying?
Yes — the exemption applies from the date of purchase, not from when payments commence. A deferred lifetime annuity bought at 65 with payments starting at 85 receives the 60%/30% concessional assessment from day one, meaning the Centrelink benefit runs through the entire deferral period, not just once payments begin. This can make deferred annuities particularly attractive for retirees with longevity concerns who also sit near the assets test threshold.