Last amended: 13 May 2016
Ongoing disability or invalidity benefits paid from a superannuation fund [2] are treated as defined benefit income streams [2]. The presence of an offset clause in the superannuation fund's group insurance policy does not alter the treatment of the disability/invalidity benefit as a defined benefit income stream, and does not invoke the compensation recovery provisions. However, pre-assessment payments paid by the Commonwealth Superannuation Corporation (CSC) while a person is waiting for a decision on their request to the CSC for invalidity retirement are considered to be compensation and are assessed under the compensation recovery provisions.
More → [3]
Income streams paid to a trust or company are assessed under the Trusts and Companies rules. If the ownership structure subsequently changes so that the income stream is paid to the beneficiary, this is treated as a commutation [2] and the commencement of a new income stream on that date. However, an income stream purchased by a self managed superannuation fund (SMSF) or small APRA fund (SAF) from a commercial provider and paid to the beneficiary through the SMSF or SAF is assessed under the income stream rules where the income stream is purchased in the beneficiary's name.
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A successor fund, in relation to a transfer of superannuation benefits of a member from one superannuation fund to another, is a fund which satisfies the following conditions:
Where the fund is a successor fund, then the transfer of the right to an income stream continues with the same commencement day, original purchase price [2], relevant number [2] and deduction, unless the person elects to commute part of the income stream. The impact of commutation will depend on the type of income stream.
Asset Test Exempt Income Streams - Defined Benefit
10.5.2/Asset Test Exempt Income Streams - Defined Benefit [5]
Compensation recovery provisions
Chapter 9.11 [6]
A superannuation fund is defined in the VEA as being:
A defined benefit income stream is an income stream [2] where the payments are not fully determined by a purchase price [2]. Instead, payments are made with reference to a set formula based on:
A commutation, in relation to an income stream [2], is the conversion of part or all of the future income stream payments into a lump sum. A commutation is similar to a withdrawal.
The purchase price of an income stream is the nominal sum of the paymetns made to purchase the income stream (including amounts paid by way of employer and employee contributions) less any commuted amounts.
Note: In determining the means test assessment of asset-tested income streams (lifetime), the purchase price is not used. Rather, the grossed up purchase amount.
Legislation: Section 5J(1) [11]of the VEA [11]
An income stream's relevant number is the length of time an income stream is paid for. It can be a fixed term or the life expectancy factor of the payee or reversionary beneficiary.
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16561%23comment-form
[2] https://clik.dva.gov.au/%23
[3] https://clik.dva.gov.au/book/export/html/16561#tgt-cspol_part10_ftn653
[4] https://clik.dva.gov.au/book/export/html/16561#tgt-cspol_part10_ftn654
[5] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/105-income-streams/1052-description-income-streams/asset-test-exempt-income-streams-defined-benefit
[6] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/911-compensation-recovery
[7] https://clik.dva.gov.au/book/export/html/16561#ref-cspol_part10_ftn653
[8] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/103-business-structures-and-trusts
[9] https://clik.dva.gov.au/book/export/html/16561#ref-cspol_part10_ftn654
[10] http://clik.dva.gov.au/glossary/foreign-superannuation-fund
[11] http://clik.dva.gov.au/legislation-library