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General Provisions for Family Law Affected Income Streams

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Last amended: 20 February 2012

    

Types of Family Law Affected income stream

The table below describes the different types of [glossary:Family Law Affected (FLA):] income stream.

Type

Description

Original FLA income stream

The income stream that is the subject of a property settlement between the owner and the former partner

[glossary:Primary:] [glossary:FLA:] income stream

The portion of the original FLA income stream awarded to the owner of the original FLA income stream

[glossary:Secondary:] [glossary:FLA:] income stream

The portion of the original FLA income stream awarded to the former partner of the owner of the original FLA income stream

How an original FLA income stream is affected by separation

The original FLA income stream is split into the primary and secondary FLA income streams according to the terms of a superannuation agreement or a court order. The split may take one of two forms:

  • a percentage payment split, in which the owner and the former partner are each awarded a percentage of the original FLA income stream
  • a base amount payment split, in which the entitlement of the owner and former partner are specified as dollar amounts.
Percentage payment splits

Under a percentage payment split, the asset value, income stream payments and deduction in respect of return of capital applying to the original FLA income stream is the same as the sum of the portions of those amounts applying to the primary FLA income stream and the secondary FLA income stream.

Trustee discretion to pay lump sum to former partner under percentage payment split

Before the first income stream payment is paid under the split, the income stream provider may exercise their discretion under regulation 14G of the Family Law (Superannuation) Regulations 2001 to pay out the entitlement of the former partner as a lump sum. This can be done by either:

  • creating a separate income stream in favour of the former partner,
  • rolling the amount over to another fund or retirement savings account in favour of the former partner, or
  • paying the amount directly to the former partner.

In each case, the former partner's claim is finalised and there is no further entitlement to any payments in respect of the original FLA income stream.

Base amount payment splits

The income stream provider will generally seek to pay out the former partner's base amount interest in full immediately after the operative date by transfer, rollover or commutation to a lump sum. When this is done, the former partner is not entitled to receive any further payments in respect of the income stream. In some cases, this is not possible and the income stream is split into primary and secondary FLA income streams.

Means test assessment of base amount payment splits before date of first splittable payment

The former partner does not need to decide how they want to receive the base amount until the date of the first splittable payment. The assessable income from the primary and secondary FLA income streams cannot be calculated until the decision is made. Therefore, no income is assessed from either the primary or secondary FLA income streams between the operative time and the date of the first splittable payment. However, the asset value is still assessed in respect of income streams that are not 100% asset test exempt.

Operative time

The operative time is the date from which assessment of the split payments commences. This table describes how the operative time is calculated.

If the payment split occurs under

then the operative time is

a court order

the time specified in the court order

a superannuation agreement and the income stream provider is not a self managed superannuation fund (SMSF)

the beginning of the fourth business day after the day on which a copy of the agreement is served on the income stream provider

a superannuation agreement and the income stream provider is an SMSF

the time when a copy of the agreement is served on the trustee

Notional purchase price

The notional purchase price (NPP) refers to the purchase price of an FLA income stream at the time that the FLA income stream is assessed. The NPP is different from the purchase price of the original FLA income stream on its commencement day.


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.

 

 

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.

 

 

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.

 

 

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.