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According to section 5J of the VEA, a deductible amount, in relation to an income stream, means the sum of the amounts that are the tax free component, worked out under the tax law, of the payments received from the DBIS.
The tax free component is an amount calculated by the income stream provider under either Subdivision 307-C of the Income Tax Assessment Act 1997 or section 307-125 of the Income Tax (Transitional Provisions) Act 1997. The tax free component is the same as the deductible amount for DVA purposes and reduces the amount of assessable income from a defined benefit income stream.
A defined benefit income stream is an income stream where the payments are not fully determined by a purchase price. Instead, payments are made with reference to a set formula based on:
- the person's salary before retirement,
- years of service, and/or
- the governing rules of the income stream.
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