Exemptions from the Income Stream Provisions

Last amended: 23 March 2010

No saving provisions for income stream provisions

The income stream provisions have no general saving provisions. This means that all income streams are assessable under the current legislation unless an exemption has been granted.

Conditions for gaining an exemption

The Minister has the power to exempt a pensioner from the current income stream assessment rules if the pensioner:

• has entered into a binding arrangement for an income stream before 13 May 1997,
• has continuously been [glossary:receiving a:] service pension, income support supplement, or a social security payment since 19 September 1998 up to the date when a claim for exemption was lodged, and
• would, in the Minister's opinion, be financially significantly disadvantaged by the application of the current rules.

What is a binding arrangement?

A decision on whether a person has entered into a binding arrangement is determined by a delegate of the Commission. Only if a case satisfies this criterion should consideration be given to seeking a ministerial opinion in respect of significant disadvantage. A binding arrangement exists if the product:

• cannot be commuted, or have its terms of contract altered to qualify for asset test exemption, or
• cannot be commuted without causing the pensioner severe detriment (severe detriment is determined by assessing the cost of exiting the product in relation to the pensioner's specific financial circumstances). Cases involving severe detriment should be referred to the Benefits, Payments and Rehabilitation Policy team in the Canberra office.     
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Application of exemption

The exemption from assessment of an income stream applies to individual income streams held by individual pensioners. If a pensioner has multiple products, then each product held by that pensioner will need to be considered separately against the exemption criteria. Granting an exemption to an individual pensioner in respect of an income stream product is not a precedent to granting an exemption to other pensioners with the same product. As most products affected by the 20 September 1998 amending changes can be commuted, and contracts can generally be renegotiated with the agreement of the parties involved, it is expected that few pensioners will meet the criteria for a binding arrangement.

Acceptance of request for exemption

A request for exemption will generally be granted on the grounds of significant disadvantage if the assessment under the new rules reduces the person's total income to below the maximum rate of pension/allowance plus the income free area under the income test. Effectively, significant disadvantage exists where:

(New rate of pension + other income) is less than the (maximum rate of pension + income free area).

Continuation of exemption

A pensioner must have been in continuous receipt of an income support payment since 19 September 1998 to continue to have the benefit of an exemption. Transfer from one payment to another is acceptable, but if an income support pension ceases to be payable for a period, and pension is reinstated at a future date, the exemption is lost unless the Minister makes a new written declaration that the person's income stream be exempt from assessment under the current rules.