“Technically, this means that, even where an individual has not elected to commute their legacy pension under the amnesty, the income stream ceased to be asset-test exempt from the moment the commutation option became available on 7 December 2024.”

Bussoletti said the SMSFA had raised concerns about the issue, and Treasury acknowledged the unintended consequence of the loss of asset-test exemption, which would lead to an inappropriate outcome where affected social security recipients who chose not to commute their legacy product, would nonetheless lose asset-test exemption for their legacy pension.

“The commutation of a ‘legacy’ pension that was previously asset-test exempt for Centrelink purposes would have resulted in the failing of the Centrelink provisions, leading to a loss of asset-test exemption and the potential for a clawback of any overpayments over the previous five years,” he said.

“With the disallowance period for the specification to address the debt waiver concern set to expire by the end of the month, a further determination to cover another technicality was registered last week – addressing a technicality that applies even where a social security recipient has not, nor has any intention to, commute their legacy pension.”

In response to these concerns, the Minister for Social Services released Social Security (Asset-test Exempt Income Stream Guidelines) Determination 2025, which took effect on 30 September.

Bussoletti said this determination provides guidelines that enable the secretary to determine that a legacy pension is still an asset-test exempt income stream for the purposes of the act if it was an asset-test exempt income stream immediately prior to the commencement of the legacy pension amnesty period, and where the only reason the pension is no longer an asset-test exempt income stream is due to the ability for it to be commuted under the amnesty period.

“This ensures the secretary has the ability to determine that certain legacy pensions continue to be asset-test exempt where the commencement of the Treasury Amendment Regulations caused those income streams to inadvertently lose their asset-test exemption from 7 December 2024,” he said.

“Thankfully, any resulting debts from this loss of asset-test exemption may be waived pursuant to the Social Security (Waiver of Debts – Legacy Product Conversions) Specification 2025.

“Combined with the comfort that, from late October, pending the expiry of the disallowance period, debts arising from the commutation of legacy pensions will be waived, the social security impacts of the legacy pension amnesty are looking clearer.”