Base Amount Payment Split - Lifetime Income Streams

Date amended:

1 Jul 2019

External

Policy

This table shows how to calculate the asset value of Asset-tested Lifetime Income Streams where the superannuation agreement or court order specifies a base payment amount, rather than a percentage, from the original Family Law Affected income stream owned by the member.

For Asset-test Exempt Income Streams, Defined Benefit Income Streams, Asset-tested Allocated (Account-based) and Market Linked Income Streams or Long Term Income Streams, see the relevant pages under 10.5.6 Family Law Affected Income Streams.

Calculating the asset value between the operative time and the date of the first splittable payment

Assets test assessment

Stage 1 - assessment of Lifetime Income Stream between operative time and date of first splittable payment:

Calculate asset value for member (primary FLA) and non-member (secondary FLA) as follows:

Step	Description
1	Ascertain value of base amount, and value of member's superannuation interest that is subject to payment split, as determined by court order or superannuation agreement at the operative time.
2	Calculate proportions in which the asset backing the original FLA is split between the member (MPROP) and non-member (NMPROP) at the operative time. NMPROP = BA ÷ V Where: BA = base amount, and V = value of the superannuation interest determined by the court, (for court orders) or notified by the trustee (for superannuation agreements) at the operative time. MPROP = 1 – NMPROP
3	Calculate purchase amount for original FLA at operative time.
4	Calculate purchase amount at the operative time for the primary FLA and secondary FLA respectively as follows: Member purchase amount = MPROP × Purchase amount of original FLA at operative time Non-Member purchase amount = NMPROP × Purchase amount of original FLA at operative time.
5	Calculate asset values for the primary FLA and secondary FLA as per the assets test rules for asset-tested income streams (lifetime), noting that: The assessment day for the member and the non-member, in relation to the primary and secondary FLAs respectively, should be calculated separately. See the Glossary for the method for calculating the assessment day. In a case where the assessment day calculation would result in an assessment day for a person prior to the operative time, the operative time is the assessment day. IF the assessment day for the original FLA had occurred, then the threshold day for the member and the non-member, in relation to the primary and secondary FLAs respectively, should be the same as the threshold day for the original FLA. If such a calculation results in a threshold day prior to the income stream’s assessment day, then the threshold day for the income stream is the income stream’s assessment day. IF the assessment day for the original FLA had not yet occurred, then the threshold day for the member and the non-member is calculated separately under the method outlined in the Glossary.

There will be no further reassessment of asset values for the primary FLA and secondary FLA prior to the date of the first splittable payment unless the non‑member's interest is paid out in full.

Stage 2 - assessment of income streams from date of first splittable payment onwards:

Note: The value calculated for MPROP, NMPROP in stage 2 will be different from that calculated in stage 1 because part, or all, of the base amount will have been paid out in the first splittable payment.
At the date of the first splittable payment after the operative time, both the member and the non-member may be entitled to receive a commuted amount from the income stream.
Any remaining unsatisfied portion of the base amount may then be split as primary and secondary FLA payments between the member and non-member, or may be payable as a single income stream to one of the members.

Step	Description
1	Calculate proportions in which the asset backing the original FLA is split between member and non-member at the date of the first splittable payment. These proportions are respectively MPROP and NMPROP. They are calculated in the same manner as for ATE income streams, i.e.: MPROP = primary FLA income stream payment (member) ÷ original FLA income stream payment, NMPROP = secondary FLA income stream payment (non-member) ÷ original FLA income stream payment, Where: primary FLA income stream payment = first split income stream payment (annualised) from primary FLA after date of first splittable payment, secondary FLA income stream payment = first split income stream payment (annualised) from secondary FLA after date of first splittable payment, and original FLA income stream payment = payment from original FLA income stream (annualised) at time of first splittable payment, if the payment split had not occurred.
2	Calculate purchase amount for original FLA immediately before date of first splittable payment.
3	Calculate purchase amount for member's primary FLA and non-member's secondary FLA as follows: Purchase amount for primary FLA = MPROP × Purchase amount for original FLA immediately prior to the date of the first splittable payment. Purchase amount for secondary FLA = NMPROP × Purchase amount for original FLA immediately prior to the date of the first splittable payment.
4	Calculate asset values for the primary FLA and secondary FLA as per the assets test rules for asset-tested income streams (lifetime) in 10.5.4 Means Test Assessment of Asset-tested Income Streams (lifetime), noting that the assessment day and threshold day should remain the same as previously calculated at the operative time.

Subsequent commutations made by member (assets test assessment)

The member may commute part of the remaining portion of the member's original superannuation interest after the operative time.

The purchase amount for each member and non-member should be reduced by his or her share of the commutation. This variation to the purchase amount will necessitate consequent adjustments to the asset value held for each member and non-member.

Income test assessment

Stage 1 - assessment of income stream between operative time and date of first splittable payment:

No income assessed.
Any income paid out during this period is treated as an exempt lump sum.

Stage 2 - assessment of income streams from date of first splittable payment onwards:

First splittable payment is assessed as an exempt lump sum and therefore does not feature in the income test. If base amount is not satisfied by the first splittable payment then, once the first splittable payment has been made, subsequent split income stream payments will be determined using the following method.
Calculate assessable income for member (primary FLA) and non-member (secondary FLA) as follows:

Step	Description
1	Obtain new gross annual payment for primary FLA and secondary FLA.
2	The assessable income from the primary FLA and the secondary FLA is 60 per cent of the gross annual payment for each income stream.

Subsequent commutations made by member (income test assessment)

The member may commute part of the original income stream after the operative time. The family law provisions treat such commutations in the same way as for a percentage payment split, i.e. any commuted amounts must be apportioned between the primary FLA and the secondary FLA. The apportionment will be determined in accordance with the percentage of the split payment that goes to the primary FLA, and the percentage of the split payment that goes to the secondary FLA.

After the commutation is made, the new gross annual payment amount must be obtained from the fund trustee for both the member (primary FLA) and non-member (secondary FLA). The purchase amount for each member and non-member must be reduced by his or her share of the commutation.