Asset-tested income streams (long term)
An asset-tested income stream (long term) is an income stream that:
- was purchased on or after 20 September 2007, or
- was purchased before 20 September 2007 and does not meet all the characteristics of an asset test exempt income stream.
An asset-tested income stream (long term) is an income stream wher ethe specified term of the contract is:
- more than five years, or
- five years or less provided the term is equal to or greater than the owner's life expectancy.
If the income stream was purchased before 20 September 2007 and doesn not meet all the characteristics of an asset-test exempt income stream, it is an asset-tested income stream (long term).
Income streams that are paid for the life of the owner and were purchased on or after 1 July 2019 are classified as asset-tested income streams (lifetime).
Term and relevant number of an asset-tested income stream (long term)
The term of an asset-tested income stream (long term) is also known as its relevant number. For an asset-tested income stream (long term) paid for a fixed term, the relevant number is the fixed term that the income stream is payable for as specified in the contract. For asset-tested income streams (long term) paid for life and for all allocated income streams, the relevant number is either:
- the life expectancy of the primary beneficiary (that is, where there is no nominated reversionary beneficiary), or
- the longest life expectancy of either the primary beneficiary or reversionary beneficiary (ie where there is a nominated reversionary beneficiary or where the income stream is purchased in joint names).
When determining the relevant number, the actual life expectancy factors are used (that is, there is no rounding). If there is a guaranteed period, the relevant number will be based on the life expectancy, not the guaranteed period.
Asset-tested income streams (long term deemed)
An account-based income stream, also known as an allocated pension or transition to retirement pension, is an asset-tested (long term deemed) income stream and is treated as a financial asset and deemed if either:
- the income stream commenced on or after 1 January 2015; or
- the income stream commenced before 1 January 2015 and the owner has not been in continuous receipt of an income support payment since 31 December 2014.
Under grandfathering provisions, an account-based income stream is not an asset-tested (long term deemed) income stream, and will continue to be assessed as an asset-tested (long term) income stream, if it:
- commenced before 1 January 2015, and
- was assessed after 1 January 2015 as an asset-tested (long term) income stream, and
- reverted to a reversionary beneficiary under the income stream contract following the death of the original owner, and
- the reversionary beneficiary has been continuously in receipt of an income support payment since the reversion of the income stream.
Under grandfathering provisions, an account-based income stream is not an asset-tested (long term deemed) income stream, and will continue to be assessed as an asset-tested (long term) income stream, if it:
- was assessed as an asset-tested (long term) income stream, and
- was commuted on or after 1 January 2015 as part of a divorce/separation settlement (a court order under Part VIIIAA or Part VIIIB of the Family Law Act 1975), and
- a new account-based income stream was purchased by direct rollover of the proceeds, and
- the owner has been continuously in receipt of an income support payment since the commencement of the new income stream.
Asset-tested income streams (lifetime)
An asset-tested lifetime income stream is an income stream that:
- was purchased on or after 1 July 2019,
- once regular payments commence, the payments continue for the rest of the owner's life,
- the amounts paid are based on the age, life expectancy or other factors relevant to the mortality of the owner, and
- does not have the characteristics of an asset-test exempt income stream or a defined benefits scheme.
More: 10.5.2 Asset-tested Income Streams - Lifetime and 10.5.4 Income and Assets Assessment of Income Streams.
VEA: section 5JE.
Asset-tested income streams (short term)
An income stream is classified as an asset tested income stream (short term), when the term is five years or less and it is not an:
- asset-test exempt income stream,
- asset-tested income stream (long term), or
- asset-tested income stream (lifetime).
Certain income streams purchased on or after 20 September 2007 may be asset-test exempt
Most income streams purchased on or after 20 September 2007 are asset-tested income streams. There are some exceptions for income streams purchased from the commutation of an asset-test exempt income stream, if certain conditions are met.