DATE OF ISSUE: 27 DECEMBER 1990
AMENDMENTS TO INCOME TESTING OF SUPERANNUATION PENSIONS AND INCOME/ASSET TESTING OF IMMEDIATE ANNUITIES UNDER THE VEA - POLICY UPDATE
INTRODUCTION
The purpose of this instruction is to address policy issues which have arisen during the implementation of the above changes, and to amend Departmental Instruction B21/90 where required.
RELEVANT NUMBER
2.The relevant number is the length of time in years that the annuity or the superannuation pension will be payable. Annuities may be for a fixed term (eg 15 years), for life or in some cases for both, whilst superannuation pensions are for life.
3.Where payments are for life the Australian Taxation Office (ATO) calculates the relevant number using Australian Life Expectancy Tables.
4.Where the payee is married, and it is clear that the superannuation or annuity payments will revert to the surviving spouse after death of the payee, the greater of the two life expectancies is treated by ATO as the relevant number (Taxation Ruling No. IT 2157, paragraph 27 refers).
5.In most cases the superannuation fund or life office will be able to provide the relevant number. However, where this information has not been provided, but all other information is available (i.e. the UPP amount, date of commencement of pension etc) DVA will calculate the relevant number in the same manner as ATO, using Life Tables as per the Australian Master Tax Guide (Attachment A refers).
Using the life tables
Step 1 -Determine the date the superannuation pension commenced, and choose the relevant set of tables.
Step 2 -Calculate person's age in whole years at the time the superannuation pension commenced.
Step 3 -Go down the first column until you find the person's age at the time the superannuation pension became payable.
Step 4 -Move across to the column covering the date on which the person's superannuation pension commenced. This will show two life expectation factors, one for males the other for females.
Step 5 -Select the appropriate life expectation factor having regard to the person's sex. This is the Relevant Number.
REMEMBER for a married couple use the life expectancy of the person who is likely to live the longest - e.g if a veteran commences to receive a superannuation pension at age 60 and his wife is 55, use 55 (female) as the age factor.
6.Some annuities may have a fixed term and be also payable for life or lives. In this case, the greatest number of the one or more life expectancies, and the fixed term is to be used as the relevant number.
ACTION UPON DEATH
7.Paragraph 39 of B21/90 stated that the deductible amount (DA) applicable prior to death will be transferred to the surviving spouse. This needs to be clarified as follows.
8.Consistent with ATO's approach, the deductible amount will be transferred only for superannuation pensions or immediate annuities which became payable on/or after 1 July 1983.
10.This is because, superannuation pensions and immediate annuities which became payable prior to 1 July 1983, were subject to Sec 26AA of the Assessment Act which is summarised in the Australian Master Tax Guide as follows -
"contributions towards a pension by any person other than the recipient are not to be taken into account in calculating its undeducted purchase price." (paras 11-290 refer).
11.As the survivor would not have contributed to the scheme or annuity, he/she is not entitled to the deduction.
12.Conversely, superannuation pensions and immediate annuities purchased on or after 1 July 1989 are subject to Sec 27H which states -
"any contributions for which no deduction was allowable may be included in the undeducted purchase price even if not made by the taxpayer. This means that if the purchased annuity is derived successively by two or more persons, the allowance for the undeducted purchase price will not be lost on the death of the person who made the contributions or paid the purchase price " (paras 11-300 refer).
Joint Annuities
13.In the case of joint annuities, ATO calculates the DA as follows - total annuity x the person's relevant share (eg each partner's share may be 50%). Where the annuity is transferred to the surving partner upon death, his or her share is 100%. The Departments of Veterans' Affairs and Social Security (DSS) will be following the same approach - ie DA will be re-calculated using joint NAPP. In other words, the DA which will be applied to the survivor, will be the combined DA applicable prior to death.
ENTRY FEES
14.Entry fees paid in respect of an immediate annuity will be included in the purchase price for NAPP purposes (ie in the calculation of DA). This is consistent with the approach taken by ATO and DSS.
PETER HAWKER
NATIONAL PROGRAM DIRECTOR (BENEFITS)
ATTACHMENT A
LIFE EXPECTANCY TABLES
1946 - 48 Tables for super/annuity commencing on or prior to 30/6/58
AGE — MALE — FEMALE — AGE — MALE — FEMALE
55 — 18.84 — 22.04 — 66 — 11.68 — 13.74
56 — 18.11 — 21.24 — 67 — 11.12 — 13.06
57 — 17.40 — 20.44 — 68 — 10.58 — 12.40
58 — 16.71 — 19.65 — 69 — 10.06 — 11.76
59 — 16.02 — 18.88 — 70 — 9.55 — 11.14
60 — 15.36 — 18.11 — 71 — 9.05 — 10.53
61 — 14.70 — 17.35 — 72 — 8.57 — 9.95
62 — 14.06 — 16.61 — 73 — 8.10 — 9.39
63 — 13.44 — 15.87 — 74 — 7.66 — 8.85
64 — 12.84 — 15.15 — 75 — 7.23 — 8.32
65 — 12.25 — 14.44
1953 - 55 Tables for super/annuity commencing 1/7/58 to 19/4/72
55 — 19.00 — 22.81 — 66 — 11.74 — 14.31
56 — 18.26 — 21.99 — 67 — 11.18 — 13.61
57 — 17.54 — 21.18 — 68 — 10.63 — 12.93
58 — 16.84 — 20.37 — 69 — 10.10 — 12.27
59 — 16.15 — 19.57 — 70 — 9.59 — 11.62
60 — 15.47 — 18.78 — 71 — 9.11 — 11.00
61 — 14.81 — 18.01 — 72 — 8.63 — 10.39
62 — 14.17 — 17.24 — 73 — 8.17 — 9.80
63 — 13.54 — 16.49 — 74 — 7.74 — 9.23
64 — 12.93 — 15.75 — 75 — 7.33 — 8.69
65 — 12.33 — 15.02
1960 - 62 Tables for super/annuity commencing 20/4/72 to 26/5/75.
55 — 19.18 — 23.63 — 66 — 11.90 — 14.95
56 — 18.43 — 22.79 — 67 — 11.34 — 14.24
57 — 17.70 — 21.96 — 68 — 10.80 — 13.54
58 — 16.90 — 21.13 — 69 — 10.28 — 12.86
59 — 16.90 — 20.32 — 70 — 9.77 — 12.19
60 — 15.60 — 19.51 — 71 — 9.27 — 11.54
61 — 14.94 — 18.27 — 72 — 8.80 — 10.92
62 — 14.29 — 17.94 — 73 — 8.34 — 10.31
63 — 13.67 — 17.17 — 74 — 7.90 — 9.72
64 — 13.06 — 16.42 — 75 — 7.47 — 9.16
65 — 12.47 — 15.68
1965 - 67 Tables for super/annuity commencing 27/5/75 to 30/6/83
AGE — MALE — FEMALE — AGE — MALE — FEMALE
55 — 18.83 — 23.58 — 66 — 11.60 — 14.97
56 — 18.08 — 22.75 — 67 — 11.05 — 14.26
57 — 17.35 — 21.93 — 68 — 10.52 — 13.56
58 — 16.64 — 21.12 — 69 — 10.01 — 12.89
59 — 15.95 — 20.31 — 70 — 9.52 — 12.23
60 — 15.27 — 19.52 — 71 — 9.05 — 11.59
61 — 14.61 — 18.73 — 72 — 8.59 — 10.97
62 — 13.97 — 17.95 — 73 — 8.15 — 10.37
63 — 13.35 — 17.19 — 74 — 7.73 — 9.78
64 — 12.74 — 16.43 — 75 — 7.33 — 9.22
65 — 12.16 — 15.70
1975 - 77 Tables for super/annuity commencing 1/7/83 to 31/8/88
30 — 42.18 — 48.26 — 53 — 21.62 — 26.91
31 — 41.24 — 47.29 — 54 — 20.83 — 26.04
32 — 40.29 — 46.62 — 55 — 20.06 — 25.19
33 — 39.35 — 45.35 — 56 — 19.30 — 24.34
34 — 38.40 — 44.39 — 57 — 18.55 — 23.51
35 — 37.46 — 43.43 — 58 — 17.82 — 22.68
36 — 36.52 — 42.47 — 59 — 17.10 — 21.85
37 — 35.59 — 41.51 — 60 — 16.40 — 21.04
38 — 34.66 — 40.56 — 61 — 15.71 — 20.24
39 — 33.73 — 39.61 — 62 — 15.04 — 19.45
40 — 32.81 — 38.67 — 63 — 14.39 — 18.66
41 — 31.90 — 37.73 — 64 — 13.75 — 17.89
42 — 30.99 — 36.79 — 65 — 13.13 — 17.13
43 — 30.09 — 35.87 — 66 — 12.53 — 16.38
44 — 29.20 — 34.94 — 67 — 11.95 — 15.65
45 — 28.32 — 34.04 — 68 — 11.38 — 14.93
46 — 27.44 — 33.11 — 69 — 10.84 — 14.22
47 — 26.58 — 32.31 — 70 — 10.31 — 13.52
48 — 25.73 — 31.31 — 71 — 9.79 — 12.84
49 — 24.88 — 30.42 — 72 — 9.30 — 12.18
50 — 24.05 — 29.53 — 73 — 8.82 — 11.53
51 — 23.23 — 28.65 — 74 — 8.35 — 10.90
52 — 22.42 — 27.77 — 75 — 7.91 — 10.29
1980 - 82 Tables for super/annuity commencing on or after 1/9/88
AGE — MALE — FEMALE — AGE — MALE — FEMALE
30 — 43.51 — 49.67 — 53 — 22.63 — 28.02
31 — 42.56 — 48.70 — 54 — 21.82 — 27.14
32 — 41.61 — 47.72 — 55 — 21.02 — 26.27
33 — 40.67 — 46.75 — 56 — 20.24 — 25.40
34 — 39.72 — 45.78 — 57 — 19.47 — 24.55
35 — 38.77 — 44.81 — 58 — 18.71 — 23.70
36 — 37.82 — 43.84 — 59 — 17.96 — 22.85
37 — 36.88 — 42.88 — 60 — 17.23 — 22.02
38 — 35.94 — 41.91 — 61 — 16.52 — 21.20
39 — 35.00 — 40.95 — 62 — 15.81 — 20.38
40 — 34.07 — 40.00 — 63 — 15.13 — 19.58
41 — 33.14 — 39.05 — 64 — 14.46 — 18.78
42 — 32.20 — 38.10 — 65 — 13.80 — 18.00
43 — 31.30 — 37.16 — 66 — 13.17 — 17.22
44 — 30.39 — 36.22 — 67 — 12.55 — 16.46
45 — 29.49 — 35.28 — 68 — 11.95 — 15.72
46 — 28.60 — 34.36 — 69 — 11.37 — 14.98
47 — 27.71 — 33.43 — 70 — 10.81 — 14.26
48 — 26.84 — 32.52 — 71 — 10.27 — 13.56
49 — 25.98 — 31.66 — 72 — 9.75 — 12.87
50 — 25.12 — 30.70 — 73 — 9.25 — 12.19
51 — 24.28 — 29.80 — 74 — 8.77 — 11.53
52 — 23.45 — 28.91 — 75 — 8.31 — 10.89