Examples of Defined Benefit Income Stream Assessment

Last amended: 13 May 2008

Example 1 - Person over 60, no deductible amount in assessment

Jack, a 62 year old service pensioner, did not notify of the deductible amount for his income stream prior to 1 July 2007. The income stream commenced prior to 1 July 2007. Because no deductible amount was recorded under the pre 1 July 2007 rules method, Jack is not covered by the saving provision. From 1 July 2007, the new 1 July 2007 rules method will apply.

Example 2 - Person under 60, deductible amount already in assessment

James, a 58 year old service pensioner, did not notify of the deductible amount for his income stream prior to 1 July 2007. The income stream commenced prior to 1 July 2007. On 4 July 2007, the income stream provider notifies DVA that James has a deductible amount. Because he is not yet 60, the deductible amount is calculated under the pre 1 July 2007 rules method. The deductible amount applies from the date of notification. When James turns 60, the income stream provider notifies DVA that James' deductible amount has changed. The new deductible amount, calculated under the new 1 July 2007 rules method, is lower than the deductible amount calculated under the pre 1 July 2007 rules method. James is covered by the saving provision and the old deductible amount continues to apply.

Example 3 - Person over 60, covered by saving provision

Julia, a 70 year old service pensioner, advised of her deductible amount before 1 July 2007. Apart from her defined benefit income stream of $100 per fortnight, she has no other income.  Her deductible amount is $20 per fortnight so the assessable income is $80 per fortnight. The deductible amount under the New 1 July 2007 rules method would be $0. Even though Julia's service pension has not been reduced by the income from the defined benefit income stream, the saving provision will apply from 1 July 2007. Because the deductible amount was notified prior to 1 July 2007, the service pension is considered to have been affected prior to the trigger day and the requirements of the saving provision are satisfied.

Example 4 - Claim for income support pension lodged after turning 60

John's claim for service pension lodged on 10 August 2007 is granted with that date as his start date. John has already turned 60. John is not covered by the saving provision because he did not receive a pension prior to his trigger day (the later of his 60 — th birthday and 1 July 2007) that was affected by a deductible amount calculated under the pre 1 July 2007 rules method. The deductible amount is therefore calculated under the New 1 July 2007 rules method.

Example 5 - Saving provision ceases to apply when new deductible amount is higher

Jenny, a 71 year old service pensioner, notified of her deductible amount prior to 1 July 2007. Her deductible amount under the New 1 July 2007 rules method was lower and the saving provision was applied. On 1 July 2008, her income stream provider advises of a new deductible amount that is higher than the old deductible amount. The saving provision ceases to apply from that date.

Example 6 - Commutation when assessed under pre 1 July 2007 rules method

Jerry, a 58 year old service pensioner, notified of his deductible amount prior to 1 July 2007. His deductible amount is assessed under the pre 1 July 2007 rules method. He makes a commutation on 30 September 2007. From that date, the deductible amount is calculated under the new 1 July 2007 rules method.

Example 7 - Commutation after saving provision has been applied

Joseph, a 65 year old service pensioner, has his deductible amount calculated under the saving provision. He makes a commutation from his income stream on 30 September 2007. Because the commutation is not made between 1 July 2007 and his trigger day, his deductible amount continues to be calculated under the saving provision.

Example 8 - Saving provision ceases when person ceases to receive service pension

Jane receives service pension from mid 2005. She notified of her deductible amount prior to 1 July 2007. She turned 60 in 2006 and her deductible amount from 1 July 2007 was assessed under the saving provision. On 20 August 2007, her service pension is reduced to nil due to income from a part time job. Jane reapplies for service pension on 15 April 2009 after her income reduces. She is granted from that date and the deductible amount is calculated under the new 1 July 2007 rules method.