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Asset-Tested Income Streams

Document
Last amended 
15 January 2015

    VEA

 
Asset-tested income streams (long term)

An asset-tested income stream (long term) is an income stream that:

  • was purchased on or after 20 September 2007, or
  • was purchased before 20 September 2007 and does not meet all the characteristics of an asset test exempt income stream and

has a term of either:

Certain income streams purchased on or after 20 September 2007 may be asset-test exempt

Most income streams purchased on or after 20 September 2007 are asset tested income streams. There are some exceptions for income streams purchased from the commutation of an asset-test exempt income stream, if certain conditions are met.     

Term and relevant number of an asset-tested income stream (long term)

The term of an asset-tested income stream (long term) is also known as its relevant number. For an asset-tested income stream (long term) paid for a fixed term, the relevant number is the fixed term that the income stream is payable for as specified in the contract. For asset-tested income streams (long term) paid for life and for all allocated income streams, the relevant number is either:

When determining the relevant number, the actual life expectancy factors are used (that is, there is no rounding). If there is a guaranteed period, the relevant number will be based on the life expectancy, not the guaranteed period.

Asset-tested income streams (long term deemed)

An account-based income stream, also known as an allocated pension or transition to retirement pension, is an asset-tested (long term deemed) income stream and is treated as a financial asset and deemed if either:

  • the income stream commenced on or after 1 January 2015; or
  • the income stream commenced before 1 January 2015 and the owner has not been in continuous receipt of an income support payment since 31 December 2014, or

Under grandfathering provisions, an account-based income stream is not an asset-tested (long term deemed) income stream, and will continue to be assessed as an asset-tested (long term) income stream, if it:

  • commenced before 1 January 2015, and
  • was assessed after 1 January 2015 as an asset-tested (long term) income stream, and
  • reverted to a reversionary beneficiary under the income stream contract following the death of the original owner, and
  • the reversionary beneficiary has been continuously in receipt of an income support payment since the reversion of the income stream.

Under grandfathering provisions, an account-based income stream is not an asset-tested (long term deemed) income stream, and will continue to be assessed as an asset-tested (long term) income stream, if it:

  • was assessed as an asset-tested (long term) income stream, and
  • was commuted on or after 1 January 2015 as part of a divorce/separation settlement (a court order under Part VIIIAA or Part VIIIB of the Family Law Act 1975), and
  • a new account-based income stream was purchased by direct rollover of the proceeds, and
  • the owner has been continuously in receipt of an income support payment since the commencement of the new income stream.
 
Asset-tested income streams (short term)

An income stream is classified as an asset tested income stream (short term), when it is not an:


 

An income stream is an asset tested long term income stream if it is:

  • and has either;
  •      a term greater than 5 years; or
  •      a term of 5 years or less, that is equal to or greater than the person's life expectancy.

 

 

According to section 5J(1) of the VEA, an income stream includes:

  • an income stream arising under arrangements that are regulated by the Superannuation Industry (Supervision) Act 1993; or
  • an income stream arising under a public sector scheme (within the meaning of that Act); or
  • an income stream arising under a retirement savings account; or
  • an income stream provided by a life insurance business (within the meaning of the Life Insurance Act 1995); or
  • an income stream provided by a friendly society (within the meaning of the Income Tax Assessment Act 1996); or
  • an income stream designated in writing by the Commission for the purposes of this definition, having regard to the guidelines determined under subsection 5J(1F) of the VEA;
  • but does not include any of the following:
  • available money;
  • deposit money;
  • a managed investment;
  • a listed security;
  • a loan that has not been repaid in full;
  • an unlisted public security; or
  • gold, silver or platinum bullion.

 

 

An income stream is an asset-test exempt income stream if it is purchased before 20 September 2007 and satisfies the characteristics of the following sections in the Veterans' Entitlements Act 1986:

Life expectancy is the length of time a person is expected to live and is has the same meaning as 'life expectancy factor' under section 27H of the Income Tax Assessment Act 1936.

The commencement day in relation to an income stream is the first day of the period to which the first income stream payment relates. This is usually one instalment period before the date of the first payment.

 

 

An income stream's relevant number is the length of time an income stream is paid for. It can be a fixed term or the life expectancy factor of the payee or reversionary beneficiary.

A guaranteed period ensures that the pension payments will continue to the estate should the owner and the reversionary beneficiary die during the guaranteed period.

An income stream is an asset tested short term income stream if it is;