Date amended:
External
Policy

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

This table shows how to calculate the asset value of a Lifetime Income Stream where the superannuation agreement or court order specifies that payments from the original Family Law Affected (FLA) income stream, owned by the member, are to be split with the former partner (non‑member) on a percentage basis.

Calculating the asset value

To calculate the Lifetime Income Stream assessable asset values for the member (primary FLA) and non-member (secondary FLA) respectively:

Step

Description

1

Ascertain the percentages awarded to the member and the non-member in the payment split (e.g. 60% - 40%).

The percentages indicate the proportions (MPROP, NMPROP) in which the member's original interest is apportioned respectively between the member and the non-member.

2

Calculate the purchase amount of original FLA at operative time.

3

Calculate the purchase amount at the operative time for the primary FLA and secondary FLA respectively using the formula:

Purchase amount of primary FLA at operative time =
MPROP × Purchase amount of original FLA at operative time

Purchase amount of secondary FLA at operative time =
NMPROP × Purchase amount of original FLA at operative time

Where:

• MPROP is the proportion of original FLA awarded to the member at the operative time, and
• NMPROP is the proportion of original FLA awarded to the non-member at the operative time.

4

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 assessment day for the method. 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 (see Glossary for threshold day method) 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 in the Glossary.

Subsequent commutations made by member (assets test assessment)

The member may commute part of the original income stream after the operative time. The family law provisions require that such commuted amounts be apportioned between the primary FLA and the secondary FLA in the proportions resulting from the original percentage payment split.

The purchase amount for each member and non-member’s FLA will be reduced by their share of the commutation, with consequent adjustments to the member's and non-member's asset value.

Income test assessment

Calculate assessable income for member (primary FLA) and non-member (secondary FLA) respectively as follows:

Step

Description

1

Obtain gross annual payment for primary FLA and secondary FLA respectively.

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 require that such commuted amounts be apportioned between the primary FLA and the secondary FLA in the percentages specified in the original percentage payment split.

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.

Example: Paris buys a fixed term pension from XYZ super fund on 1 January 2020. Paris’ income stream is assessed by DVA as an 'asset-tested income stream (lifetime)'.

Purchase amount = \$200,000

Pension payments = \$9,000 p.a

Assessment day = 1 January 2020

Threshold day = 1 July 2040

The income stream was purchased in one lump sum, and no commutations or additional payments were made after the assessment day.

5 years after purchasing the income stream, Paris and Sydney get divorced.

Court orders a percentage payment split with 60% of payments going to Paris and 40% of payments going to Sydney. Operative time is 1 January 2025.

Under the payment split, Paris receives a primary FLA income stream with annual payments of \$5,400 and Sydney receives a secondary FLA income stream with payments of \$3,600. These amounts are advised to DVA by the trustee.

Assets test

Step

Description

1

Paris’ proportion of the payment split is 60%.

Sydney’s proportion of the payment split is 40%.

2

Calculate the purchase amount of the original FLA income stream (original FLA) at the operative time.

As the income stream was purchased in one lump sum, and no commutations or additional payments were made after the assessment day, the purchase amount of the original FLA is \$200,000.

3

Calculate the purchase amount for the primary FLA (member) and secondary FLA (non‑member) income stream at the operative time.

MNPP (Paris)

= MPROP × Purchase amount of the original FLA at the 'operative time'

= 0.60 × \$200,000

= \$120,000 (Paris’ NPP at the operative time)

NMNPP (Sydney)

= MPROP × Purchase amount of the original FLA at the operative time

= 0.40 × \$200,000

= \$80,000 (Sydney’s NPP at the operative time).

4

Calculate asset values for the primary FLA and secondary FLA as per the assets test rules for asset-tested income streams (lifetime), using purchase amounts of \$120,000 for Paris, and \$80,000 for Sydney, noting the threshold day of the original FLA was 1 July 2039, and the assessment day of the original FLA was 1 January 2020.

The assessment day and threshold day for the primary FLA and the secondary FLA will depend on Paris and Sydney’s individual circumstances (e.g. their age, when they meet a condition of release, when they reach pension age).

Income Test

Step

Description

1

As per advice by the fund trustee, Paris’ new gross annual payment is \$5,400 (primary FLA). Sydney’s gross annual payment (secondary FLA) is \$3,600.

2

Calculate the assessable income by using the formula:

Paris has assessable income of \$5,400 x 0.6 = \$3,240

Sydney has assessable income of \$3,600 x 0.6 = \$2,160

Effect of commutations after operative time

On 1 January 2028 (3 years after the operative time and 8 years after the assessment day), Paris made a commutation of \$10,000 from the income stream. As this is a FLA income stream, Paris is only entitled to receive 60% of the commuted amount (i.e. \$6,000), while 40% will go to Sydney (i.e. \$4,000). The 'proportional split' was originally set out in the superannuation agreement or court order.

Assets test when a commutation is made under a percentage payment split

Step

Description

1

Recalculate purchase amount for both the primary FLA (member) and secondary FLA (non‑member) income stream by using the formula:

Adjusted purchase amount of primary FLA =
Purchase amount of primary FLA − Proportion of the commuted amount

\$120,000 − \$6,000 = \$114,000 (Paris’ adjusted purchase amount)

Adjusted purchase amount of secondary FLA =
Purchase amount of secondary FLA − Proportion of the commuted amount

\$80,000 − \$4,000 = \$76,000 (Sydney’s adjusted purchase amount).

2

Calculate asset values for the primary FLA and secondary FLA as per the assets test rules for asset-tested income streams (lifetime), using purchase amounts of \$114,000 for Paris, and \$76,000 for Sydney. The assessment day and threshold day for the primary and secondary FLAs would not change due to the commutation.

Income test when a commutation is made under a percentage payment split

Step

Description

1

Obtain from the fund trustee the new gross annual payments after the commutation is made for both the member (primary FLA) and non-member (secondary FLA). In this example, Paris’ new gross annual payment is \$4,320. Sydney’s new gross annual payment is now \$2,880.

2

Calculate the assessable income by using the formula:

Paris has assessable income of \$4,320 x 0.6 = \$2,592

Sydney has assessable income of \$2,880 x 0.6 = \$1,728