Other Rules Regarding Income Streams

Last amended: 13 May 2016

Ongoing disability/invalidity benefits paid from a superannuation fund

Ongoing disability or invalidity benefits paid from a superannuation fund are treated as defined benefit income streams. The presence of an offset clause in the superannuation fund's group insurance policy does not alter the treatment of the disability/invalidity benefit as a defined benefit income stream, and does not invoke the compensation recovery provisions. However, pre-assessment payments paid by the Commonwealth Superannuation Corporation (CSC) while a person is waiting for a decision on their request to the CSC for invalidity retirement are considered to be compensation and are assessed under the compensation recovery provisions.    

Income streams paid to a trust or company

Income streams paid to a trust or company are assessed under the Trusts and Companies rules. If the ownership structure subsequently changes so that the income stream is paid to the beneficiary, this is treated as a commutation and the commencement of a new income stream on that date. However, an income stream purchased by a self managed superannuation fund (SMSF) or small APRA fund (SAF) from a commercial provider and paid to the beneficiary through the SMSF or SAF is assessed under the income stream rules where the income stream is purchased in the beneficiary's name.    

Successor funds

A successor fund, in relation to a transfer of superannuation benefits of a member from one superannuation fund to another, is a fund which satisfies the following conditions:

• the fund gives the member equivalent rights to the rights they had in the original fund in respect of the superannuation benefits, and
• before the transfer, the trustee of the fund agreed with the trustee of the original fund that the fund will confer on the member equivalent rights to the rights that the member had under the original fund in respect of the benefits.

Where the fund is a successor fund, then the transfer of the right to an income stream continues with the same commencement day, original purchase price, relevant number and deduction, unless the person elects to commute part of the income stream. The impact of commutation will depend on the type of income stream.