Asset-Test Exempt Income Streams - Defined Benefit

VEA

General characteristics of defined benefit income streams

A defined benefit income stream is an income stream that:

• meets the definition of 'pension' as specified in the Superannuation Industry (Supervision) (SIS) Regulations 1994,
• is paid from a public sector or private sector defined benefit superannuation fund,
• determines the payment rate by factors other than the purchase price, such as the length of service and final salary.

Conditions for exemption to be extended

All of the following conditions must be met for a defined benefit income stream to be asset-test exempt:

• the scheme or fund from which the income stream is paid:

• was established before 20 September 1998, and
• provided the income stream product before that date,

• the income stream product was treated as a superannuation pension and was exempt from the assets test before 20 September 1998,

• a pensioner started the income stream:

• before 20 September 1998, or
• after 20 September 1998 from a pre-20 September 1998 defined benefit superannuation pension product,

• for a private sector scheme or fund, unless the pensioner is a reversionary beneficiary:

• the income stream is directly connected to the pensioner's previous employment, and
• the payments from the defined benefit income stream become payable to, or for, the pensioner because of that employment.

Term and relevant number of a defined benefit income stream

Although the term of a defined benefit income stream is for the life of the beneficiary, the relevant number is either the:

• life expectancy of the primary beneficiary (ie where there is no nominated reversionary beneficiary), or
• longest life expectancy of either the primary beneficiary or reversionary beneficiary (ie where there is a nominated reversionary beneficiary or where the income stream is purchased in joint names).

When determining the relevant number the actual life expectancy factors are used (ie there is no rounding).

Reversion to reversionary beneficiary

Defined benefit income streams continue to be asset-test exempt on reversion to a reversionary beneficiary. On reversion, the gross payment, deductible amount and the deductible amount calculation method may change.