Glossary

Account-based pension

A superannuation income stream paid from an account the member still owns: the balance moves with earnings and drawdowns, a minimum must be paid each year, and the account lasts until it is exhausted. It is the standard retirement-phase product, and starting one is what creates a credit in the member's transfer balance account.

For the Age Pension income test the balance is deemed rather than the payments counted — unless the pension is grandfathered under the earlier rules.

Also called: Allocated pension (the pre-2007 term for the same structure).

See also: Minimum pension drawdown, Retirement phase, Grandfathered account-based pension, Deeming

Accumulation phase

The phase a superannuation interest is in while it is being built up: contributions go in, earnings are taxed inside the fund, and no income stream is being paid from it. An interest stays in accumulation phase until it is used to start a retirement-phase income stream.

Nothing in accumulation phase counts against the transfer balance cap — but all of it counts in total super balance, and all of it is inside the Division 296 measure.

See also: Retirement phase, Total super balance

Binding death benefit nomination (BDBN)

A nomination that directs the trustee to pay a death benefit to named SIS dependants or to the legal personal representative, removing the trustee's discretion where the nomination is valid. Validity is the whole of the issue: a nomination in favour of someone outside the SIS definition of dependant, or one that has lapsed under the fund's rules, hands the decision back to the trustee.

Some funds offer non-lapsing nominations and some do not, and SMSF deeds vary widely — the fund's own rules decide what is possible, not the will.

Not to be confused with: A reversionary pension, which is a feature of the income stream itself and generally takes effect ahead of a nomination.

See also: Reversionary pension

Condition of release

The event that unlocks preserved benefits: retirement on or after preservation age, reaching the age at which benefits become available regardless of whether the member has retired, permanent incapacity, terminal medical condition, death, and the compassionate and severe financial hardship grounds.

Each condition carries a cashing restriction, and that is the part that matters. Only a condition with a nil cashing restriction lets a member take a lump sum or start a retirement-phase pension; reaching preservation age while still working meets a condition with a restriction, which is what a transition to retirement income stream runs on.

See also: Preservation age, Preserved benefits

Division 296

An additional 15% on the share of a member's superannuation earnings attributable to total super balance above $3,000,000, with a further 10% on the share attributable to balance above $10,000,000. It is assessed to the member personally rather than to the fund, and the member can elect to have it released from super.

It is the one balance-tested measure that does not use the prior 30 June: it looks at total super balance at the end of the income year.

Not to be confused with: Division 293, which is a surcharge on contributions and is tested on income, not on balance.

Full explainer: Division 296 →

Minimum pension drawdown

The amount that must be paid out of an account-based pension each year for the assets supporting it to keep their retirement-phase earnings tax exemption. It is a percentage of the account balance at the start of the financial year — or at commencement, in the first year — and the percentage steps up through age bands.

A pension commenced part-way through a year is pro-rated by days, and one commenced in the final month of the year requires no payment in that year. Missing the minimum is not a small administrative problem: the fund can lose the exemption for the whole year.

Also called: Minimum pension payment, minimum drawdown.

See also: Account-based pension, Retirement phase

Preservation age

The age at which preserved benefits can be paid, once the member also meets a condition of release. It is 60 for everyone who has not yet reached it — the transitional table that stepped up year by year no longer has anyone left in it.

Reaching preservation age is not by itself a condition of release: it opens the door to retirement, and to a transition to retirement income stream, but not to unrestricted access.

Not to be confused with: Age Pension age, which is set under social security law, is a different age, and has nothing to do with access to super.

See also: Condition of release

Preserved, restricted non-preserved and unrestricted non-preserved benefits

The three preservation categories every superannuation interest is split into. Preserved benefits cannot be paid until a condition of release is met, and are almost the whole of a modern balance. Restricted non-preserved benefits can be paid on termination of employment with the employer who contributed them. Unrestricted non-preserved benefits are payable on demand — a condition of release has already been met and no cashing restriction applies.

The split is the first thing to check before a partial withdrawal or a pension commencement, because it decides what can be paid at all.

See also: Condition of release

Retirement phase

The phase an interest is in when it is supporting a superannuation income stream that meets the payment standards — in practice an account-based pension started after a condition of release with a nil cashing restriction. Earnings on the assets supporting it are exempt from tax in the fund, and moving an amount into it creates a credit in the member's transfer balance account.

A transition to retirement income stream is not in retirement phase, and does not get the exemption, until the member meets a further condition of release.

See also: Accumulation phase, Transfer balance account

Reversionary pension

An income stream that automatically continues to a nominated beneficiary — in practice a spouse — on the member's death, instead of stopping and being paid out as a death benefit. Whether a pension is reversionary is fixed when it commences, not by the will or by a later nomination.

Because it continues rather than stops, the beneficiary's transfer balance account is credited with the value at the date of death, and the credit arises later than the death itself. That deferral is the point: it gives a beneficiary with a cap problem time to deal with it rather than forcing an immediate commutation.

See also: Binding death benefit nomination, Personal transfer balance cap

Self managed superannuation fund (SMSF)

A superannuation fund with a small number of members, each of whom is a trustee or a director of its corporate trustee, regulated by the ATO rather than APRA. The members set the investment strategy, hold the assets and carry the compliance obligations — the sole purpose test, the in-house asset limit, the arm's-length rules and an annual audit.

Every member-level measure applies exactly as it does in a large fund. Total super balance, the transfer balance cap and Division 296 do not care what kind of fund the interest sits in.

Taxable component

The part of a superannuation interest that is not the tax-free component — broadly, concessional contributions and fund earnings. It is taxable to a member who withdraws it below the relevant age, tax free to a member above it, and taxable in the hands of a non-dependant death benefit beneficiary whatever the member's age.

That last point is what makes the component split worth managing while the member is alive rather than at claim time.

Not to be confused with: The taxed and untaxed elements within the taxable component — an untaxed element, typically from an older public sector scheme, is taxed differently again.

See also: Tax-free component

Tax-free component

The part of a superannuation interest made up of the member's non-concessional contributions plus a crystallised segment carried forward from the earlier rules. It is paid out tax free to anyone, including a non-dependant beneficiary.

Every withdrawal and every pension payment draws on both components in the same proportion as the interest they come from. A member cannot choose to take the tax-free component only, which is why the proportions are set at commencement and why a recontribution changes them.

See also: Taxable component

Total super balance

The value of all of a member's superannuation interests at a point in time, accumulation and retirement phase together, measured at 30 June. It is the gate on almost every contribution strategy: carry-forward below $500,000, the bring-forward tiers, the co-contribution and the spouse offset, all tested at the prior 30 June.

Also called: TSB.

Not to be confused with: The transfer balance account, which is a ledger of transfers into retirement phase rather than a balance measure — the two share the general cap figure but nothing else.

Full explainer: Total super balance — every threshold it gates →

Transfer balance account

The running ledger the ATO keeps for every member who has ever had a retirement-phase income stream. Amounts moved into retirement phase are credits; commutations and certain other events are debits. Investment earnings, pension payments and market movements are neither — the account does not track the value of the pension.

The balance of this account, not the current value of the income stream, is what is tested against the member's personal transfer balance cap.

See also: Transfer balance account report (TBAR), Transfer balance cap

Transfer balance account report (TBAR)

The report a fund lodges to tell the ATO about credits and debits to a member's transfer balance account. Nothing reaches the account until it is reported, so the ATO's figure lags the fund's.

That lag is why a commutation or a second pension commencement close to the cap should be worked from the fund's own records rather than from the client's ATO online view, and why an excess determination can arrive long after the event that caused it.

See also: Transfer balance account

Transfer balance cap — general and personal

The general transfer balance cap is the standard ceiling on the amount that can be moved into retirement phase: $2,100,000 for FY2026-27. The personal transfer balance cap is the member's own ceiling, and it is the one that binds.

A member's personal cap starts at the general cap of the year they first commenced a retirement-phase income stream, and is then indexed only by the unused proportion of it — so a member who has used the whole of their cap never gets an increase, and a member who has used part of it gets that share of the $100,000 step. Two clients with identical balances can have different personal caps.

Full explainer: Personal transfer balance cap →

See also: Transfer balance account

AWOTE

Average weekly ordinary time earnings — the ABS series several superannuation thresholds are indexed to. The concessional contributions cap moves with it (AWOTE, in $2,500 increments), and because the non-concessional cap is a multiple of the concessional cap and the bring-forward amounts are multiples of that, one ABS release moves most of the contribution architecture at once.

Indexation is applied in whole increments rather than continuously, which is why a cap can sit still for two or three years and then step up.

See also: Concessional contribution, Super rates and thresholds

Bring-forward arrangement

Using up to two future years of the non-concessional cap in the current year: $390,000 across three years or $260,000 across two, depending on total super balance at the prior 30 June, and nil at $2,100,000.

It is triggered automatically by a contribution above the annual $130,000 cap rather than elected, and the member must be under 75 at some time in the financial year. Once triggered, the annual cap does not reset for the length of the period, and cap indexation during it does not lift the total.

Full explainer: Bring-forward contributions →

See also: Non-concessional contribution, Total super balance

Carry-forward concessional contributions

Unused concessional cap from the prior 5 years, usable in a later year if total super balance at the prior 30 June is under $500,000. Amounts are used oldest first and expire at the end of the window.

The most a member can contribute concessionally in FY2026-27 using the whole window is $175,000. The balance test is applied year by year, so a client who is over the threshold does not lose the unused amounts — they keep ageing out while unavailable.

Also called: Catch-up concessional contributions.

Full explainer: Carry-forward concessional contributions →

Concessional contribution

A contribution included in the fund's assessable income and taxed there: employer superannuation guarantee, salary sacrifice, and personal contributions for which the member claims a deduction. Capped at $32,500 for FY2026-27, plus any carry-forward space.

An excess is included in the member's assessable income with an offset for the tax the fund paid, and the excess amount can be released from the fund. High-income members pay Division 293 on top of the fund's tax.

See also: Carry-forward, Division 293, Non-concessional contribution

Division 293

An extra 15% on concessional contributions for members whose income for surcharge purposes plus their low-tax contributions exceeds $250,000. The tax applies to the lesser of the two legs — the excess over the threshold, or the concessional contributions themselves — which is what makes the liability $4,875 at most for a member contributing to the cap and no more.

The threshold has no indexation mechanism attached to it at all, so cap indexation and wage growth recruit new clients into it every year.

Not to be confused with: Division 296, which taxes earnings attributable to a large balance and is nothing to do with contributions.

Full explainer: Division 293 tax →

Downsizer contribution

A one-off contribution of up to $300,000 per person, or $600,000 per couple from the same sale, made from the proceeds of selling a qualifying home. Available from age 55 with no work test and no upper age limit, provided the home was owned for at least 10 years and the contribution is made within 90 days of settlement.

It sits outside both contribution caps and is not blocked by total super balance going in — but it is inside total super balance at the next 30 June, which is what makes sequencing it against a bring-forward a real decision rather than a formality.

Full explainer: Downsizer contributions →

Government co-contribution

A matched government payment for lower-income earners who make a personal non-concessional contribution: up to $500, paid in full at incomes at or below $49,293 and phasing out to nil at $64,293.

Eligibility also requires total super balance under the general transfer balance cap at the prior 30 June, that the non-concessional cap has not been exceeded, and that most of the member's income comes from employment or business. It is paid into the fund after the tax return is lodged rather than claimed.

See also: Co-contribution figures

Low income superannuation tax offset (LISTO)

A government payment into the fund that refunds the contributions tax paid on a low earner's concessional contributions, so that superannuation is not taxed more heavily than the same income would be outside it. It is worked out from the tax return and the fund's contribution reporting and paid automatically — nothing is claimed.

The income cut-off and the maximum payment are set in the tax law and are not held as dated figures on this site; take the current amounts from the ATO rather than from a file note.

Also called: LISTO.

See also: Concessional contribution

Maximum superannuation contribution base

The ceiling on the earnings base an employer is obliged to pay superannuation guarantee against — $270,830 per year for FY2026-27. Earnings above it attract no compulsory contribution, though an employer can agree to contribute more.

Under Payday Super it is an annual ceiling rather than the quarterly one it used to be, which changes the arithmetic for a member whose pay is uneven across the year.

See also: Payday Super, Superannuation guarantee

Non-concessional contribution

A personal contribution made from after-tax money, for which no deduction is claimed and no tax is paid in the fund. Capped at $130,000 for FY2026-27, or a bring-forward multiple of it, and nil for a member whose total super balance at the prior 30 June is at or above $2,100,000.

An excess can be released together with an associated earnings amount that is taxed to the member — or, if it is left in the fund, taxed at the top marginal rate.

Also called: NCC.

See also: Bring-forward arrangement, Total super balance

Payday Super

The requirement that superannuation guarantee contributions be paid at the same time as salary and wages, rather than on the old quarterly cycle. In effect from 1 July 2026.

Two consequences matter for advice rather than payroll: contributions land in the fund through the year instead of in lumps, which changes when a client crosses their cap and when money is invested; and the maximum superannuation contribution base applies annually rather than per quarter.

See also: Superannuation guarantee, Maximum superannuation contribution base

Small business CGT cap

A lifetime cap of $1,935,000 on contributions made from the proceeds of a small business CGT concession — the 15-year exemption and the retirement exemption. Amounts contributed under it do not count toward the non-concessional cap, so they sit outside the bring-forward arithmetic entirely.

Like a downsizer contribution, it is outside the caps going in and inside total super balance afterwards. The approved form has to be given to the fund on or before the contribution is made; a contribution made without it is simply a non-concessional contribution.

See also: Downsizer contribution, Total super balance

Spouse contribution tax offset

A tax offset for a member who makes a non-concessional contribution to a low-income spouse's superannuation. Every test is on the receiving spouse: their income must be under the threshold, their total super balance under the general transfer balance cap at the prior 30 June, and the contribution must not breach their non-concessional cap.

The maximum offset and the income band it phases out across are set in the tax law and are not held as dated figures on this site; check the ATO's current amounts before quoting one.

Not to be confused with: Contribution splitting, which moves concessional contributions already made to a spouse and gives no offset at all.

See also: Total super balance

Superannuation guarantee

The compulsory employer contribution: 12% of ordinary time earnings. The final legislated step, in place since 1 July 2025. No further legislated increases.

SG counts toward the member's concessional cap, which is why a high earner with a large SG entitlement can have almost no salary-sacrifice room left, and why the cap and the SG rate have to be looked at together rather than one at a time.

Also called: SG.

See also: Maximum superannuation contribution base, Payday Super

Adjusted taxable income

A deliberately wider income measure than taxable income, used for the Commonwealth Seniors Health Card and a range of other tests. It adds reportable fringe benefits, reportable employer superannuation contributions, deductible personal superannuation contributions, net investment losses, tax-free pensions or benefits and target foreign income back on top of taxable income.

A client whose affairs show very little taxable income can still be well over a limit on this measure — and for the Seniors Health Card, deemed income from account-based pensions is added on top of it again.

Also called: ATI.

Not to be confused with: Assessable income for the Age Pension income test, which is a different measure built on deeming rather than on the tax return.

See also: Commonwealth Seniors Health Card

Assets test

One of the two Age Pension means tests. Assessable assets above the free area reduce the pension at the assets test taper rate, and the pension is nil at the cut-off. For a single homeowner the free area is $333,000 and the cut-off $733,500.

The rate actually paid is the lower of the assets test result and the income test result, so for many clients only one of the two tests is doing any work at a given time.

Full explainer: Age Pension assets test figures →

See also: Income test, Taper rate, Homeowner and non-homeowner

Commonwealth Seniors Health Card

A concession card for people over Age Pension age who do not qualify for a payment. No assets test applies: it is income tested only, on adjusted taxable income plus deemed income from account-based pensions, against $101,105 for a single client and $161,768 for a couple combined.

Because account-based pensions are deemed for it, a self-funded retiree with no taxable income at all can fail the test — and because there is no assets test, a client well above the Age Pension assets cut-off can hold the card.

Also called: CSHC, seniors health card.

Full explainer: Commonwealth Seniors Health Card →

Deeming

The rule that attributes an assumed return to financial assets under the income test, whatever they actually earned: 1.25% up to the threshold and 3.25% above it, on a threshold of $66,800 single or $110,600 for a couple combined.

The threshold is where the rate changes, not an exemption — assets below it are deemed at the lower rate, not ignored. The rates are set by the Minister rather than indexed, so they can move in either direction and on no fixed schedule.

Full explainer: Deeming →

See also: Financial assets

Deprived asset

The amount by which a gift, or a transfer for less than value, exceeds the gifting limits. It stays in the assets test and is deemed under the income test for 5 years from the date of the gift, even though the client no longer holds it.

The client is therefore assessed on money they do not have and on a return they do not receive — which is why a gift made shortly before a claim is one of the more expensive things a client can do without advice.

Also called: Deprivation.

Full explainer: Gifting and deprivation →

Financial assets

The class of assets deeming applies to: bank accounts, term deposits, shares, managed funds, bonds and debentures, loans made to other people, gold and other bullion, and account-based pensions.

The home is not a financial asset, and neither are contents, cars, boats or collectables. Those are assessed under the assets test at their market value but are not deemed — so a client who moves money from a term deposit into personal property changes both tests at once, in opposite directions.

See also: Deeming

Free area

The amount of income or assets a client can have before a means test starts to reduce their pension. Under the income test it is $226 per fortnight for a single client and $396 per fortnight for a couple combined; under the assets test it is the threshold for their relationship and homeowner status.

Only the excess above the free area is tapered — the free area itself never reduces the pension, which is what separates it from a cut-off.

Also called: The assets test threshold, when it is the assets test that is being described.

See also: Taper rate, Income test

Gifting

Giving assets away, or transferring them for less than their value. Up to $10,000 a financial year and $30,000 across a rolling five years can be given without affecting the pension; anything above those limits is assessed as a deprived asset.

Both limits are per person or per couple, never per recipient, and neither is indexed. A gift made before a client claims a payment still counts if it falls inside the window.

Full explainer: Gifting and deprivation →

See also: Deprived asset

Grandfathered account-based pension

An account-based pension still assessed under the pre-deeming income test rules. A deductible amount, derived from the purchase price and the holder's life expectancy at commencement, is subtracted from the payments actually drawn, and only the remainder counts as income — which for many clients is a lower assessment than deeming the balance.

Grandfathering depends on the pension and the holder's qualifying payment or card both being continuous. Commuting the pension, rolling it to another provider, restarting it, or losing the underlying entitlement ends it permanently. It is worth confirming before recommending any change to an older pension held by a part-pensioner or a card holder.

See also: Deeming, Commonwealth Seniors Health Card

Homeowner and non-homeowner

Whether the client has a right or interest in the home they occupy. The home itself is an exempt asset, so a homeowner is assessed against a lower assets test free area — $333,000 against $600,000 for a single client — on the basis that a non-homeowner has to pay for housing out of the pension.

The gap between the two free areas is far smaller than most home values, which is what makes the family home the single largest item in the assets test and the reason a decision to buy, sell or rent moves the pension more than most portfolio decisions do.

See also: Assets test

Illness-separated couple

A couple who cannot live together permanently because of illness, disability or frailty — most often when one partner has moved into residential aged care. They remain a couple for the relationship rules and their income and assets are still assessed together, but each is paid at the single rate and higher thresholds apply.

It is not automatic. Services Australia has to assess the couple as illness-separated, and until it does they are assessed as an ordinary couple.

See also: Assets test, Means-tested contributions

Income test

The other Age Pension means test. Assessable income above the free area reduces the pension at the income test taper rate. Financial assets do not enter it at what they earned — they enter it deemed — and employment income is reduced first by the Work Bonus.

Because the rate paid is the lower of the two test results, a change to the deeming rates is irrelevant to a client whose assets test result is already the binding one. Establishing which test binds is the first step in any pension calculation.

Full explainer: Age Pension income test figures →

See also: Deeming, Work Bonus

Taper rate

The rate at which a pension reduces once the free area for a test is passed. Under the assets test it is $3 per fortnight per $1,000 of assessable assets above the threshold; the income test has its own separate taper. Neither is indexed.

The assets test taper is the reason assets just above the free area carry a very high effective cost: the reduction in pension over a year, expressed against the assets that caused it, is well above what those assets are likely to earn.

See also: Assets test, Free area

Work Bonus

A concession that excludes $300 per fortnight of employment and eligible self-employment income from the income test, on top of the free area. Unused amounts accrue to a balance of up to $11,800, and new pensioners generally start with $4,000 rather than nil.

It only ever applies to employment income. Investment income, deemed income and rent cannot use the Work Bonus or the accrued balance.

Full explainer: Work Bonus →

Low income tax offset (LITO)

A non-refundable offset that reduces the tax payable by lower-income individuals and phases out as income rises. Non-refundable is the operative word: it can reduce tax to nil but never produces a refund of its own, so it is worth nothing to a client whose taxable income is already under the $18,200 tax-free threshold.

Together with the Medicare levy low-income thresholds it lifts the income at which tax actually starts to be paid above that statutory threshold. The amount and the phase-out band are set in the tax law and are not held as dated figures on this site.

Also called: LITO.

Not to be confused with: The seniors and pensioners tax offset (SAPTO), which is a separate offset with its own tests and can be transferred between spouses.

Marginal tax rate

The rate applied to the next dollar of taxable income, as distinct from the average rate paid across the whole of it. The resident bands for FY2026-27 run from nil inside the $18,200 tax-free threshold up to 45% in the top band, before the Medicare levy.

It is the rate that decides whether a concessional contribution is worth making, what an excess contribution costs, and how a taxable component is taxed on the way out. An average rate answers none of those questions.

See also: Marginal tax rates, Medicare levy

Medicare levy

2% of taxable income, charged on top of income tax and subject to low-income thresholds and a phase-in.

It matters in a glossary for one reason: a rate quoted from the bracket table is not the rate a client pays on the next dollar. The top band is 45% plus the levy, and the same addition applies to every band above the low-income thresholds.

Not to be confused with: The Medicare levy surcharge, a separate charge on higher-income taxpayers without private hospital cover.

See also: Marginal tax rate

Basic daily fee

The standard contribution every permanent residential aged care resident pays toward everyday living costs — meals, laundry, cleaning, heating and the like. It is set as a proportion of the single basic rate of Age Pension, so it moves whenever the pension indexes, and it is not means tested.

Everyone pays it, whatever their assets. It sits alongside, not instead of, the accommodation payment and any means-tested contribution.

See also: Means-tested contributions

Daily accommodation payment (DAP)

The daily-payment equivalent of a refundable accommodation deposit, calculated by converting the unpaid lump sum at the maximum permissible interest rate published for the quarter the resident entered care. That rate is fixed at entry for that room, so two residents in identical rooms can pay different daily amounts.

A resident can pay the room price entirely as a lump sum, entirely as a daily payment, or as any combination of the two — and can ask for the daily payment to be drawn from the lump sum they have already paid.

Also called: DAP. A resident whose accommodation is partly government-funded pays a daily accommodation contribution (DAC) instead, on the same mechanics.

See also: Refundable accommodation deposit

Means-tested contributions

The part of a person's aged care costs that depends on their income and assets, worked out by Services Australia from a means assessment. It is what turns two residents in the same room into two very different fee outcomes.

What the contribution is called, how it is split, and what caps it are all determined by when the person entered care: a resident who entered under the previous arrangements is assessed under those, and a person entering from 1 November 2025 under the current ones. Establish the entry date before working out anything else.

The amounts are indexed and published in dated schedules. Never quote one from memory or from a prior client's file — take it from the schedule current for that person's entry date.

See also: Refundable accommodation deposit, Age Pension assets test

Refundable accommodation deposit (RAD)

A lump sum paid to an approved residential aged care provider for a permanent room, refundable to the resident or their estate when they leave, less any amounts the resident has agreed can be deducted from it. For people entering care from 1 November 2025 a provider may also retain part of the balance over time.

The planning point is the interaction between two systems: the amount paid as a RAD is an exempt asset for the Age Pension assets test but is counted in the aged care means assessment. Paying one can increase the Age Pension and increase the care contribution at the same time.

Also called: RAD. A resident whose accommodation is partly government-funded pays a refundable accommodation contribution (RAC) instead.

See also: Daily accommodation payment, Means-tested contributions

Support at Home

The Commonwealth in-home aged care programme that replaced Home Care Packages from 1 November 2025. Support is allocated at a classification level with a set budget, and what the participant contributes varies by the type of service — clinical care, independence, and everyday living are treated differently — and by their means assessment.

People already receiving a Home Care Package when it commenced moved across under arrangements intended to leave them no worse off, so an existing client's contribution is not necessarily what a new entrant with the same means would pay.

Not to be confused with: Residential aged care fees, which are a separate structure with their own accommodation payment and contributions.