Assets Assessment of Defined Benefit and Purchased Income Streams

Last amended: 13 May 2008

Asset value of 100% asset test exempt income streams

Regardless of whether an income stream is a 100% asset test exempt income stream or a defined benefit income stream, no asset value is held in the assessment.

Asset value of asset tested income streams and 50% asset test exempt income steams

For asset tested income streams, the asset value assessed is the asset value of the income stream.  If the income stream is a 50% asset test exempt income stream, only 50% of the asset value is assessed.  The asset value is determined either once per year or twice per year as described in the following table.

If the income stream has no account balance, the asset value is determined using the following formula:

Asset value = purchase price - [(purchase price - residual capital value) ÷ relevant number] x term elapsed.

If the income stream has an account balance, the asset value is the current account balance.

Note – the purchase price should be adjusted to take account of any commutation — s made from the income stream since commencement.

Calculation of term elapsed

The term elapsed is the number of years that have elapsed since the income stream's commencement day. The number of years is rounded down to the nearest:

• half-year, when the asset value is determined on a six monthly basis, or
• whole year when the asset value is determined annually.

Example of asset value of asset tested income streams

Sally is sixty five years old and single. She purchases a ten year annuity for $150,000 with a residual capital value of $20,000. She receives a total payment of $18,337 per year. Monthly payments commence on 1 January. Her assessable asset from 1 January for the first six months will be:

$150,000 - [($150,000 - $20,000) ÷ 10 years] x 0 years = $150,000.

Her assessable asset from 30 June in that year will be:

$150,000 - [($150,000 - $20,000) ÷ 10 years] x 0.5 years = $143,500.

Example of asset value after a partial commutation

John purchases a five year term annuity for $50,000 with no residual capital value. At the end of two years, the assessable asset value is: $50,000 - [($50,000-$0) ÷ 5] x 2 = $30,000.

He commutes $6,000 at this point. The new assessable asset value after commutation is:

($50,000 - $6,000) - [( $50,000 - $6,000 - $0) ÷ 5] x 2 = $44,000 - $17,600 =$26,400.

Assets test assessment of defined benefit income streams

Under Commission determinations 1998/11, 1998/12 and 1999/6, defined benefit income streams are determined to be 100% asset test exempt.