1.1.I.70 Income stream

Usage

This definition applies to all payments.

Definition

An income stream is a regular series of payments:

• made directly from accumulated superannuation contributions, or
• purchased with a lump sum (see example).

Example: The lump sum is usually:

• a roll-over amount from another superannuation fund (section 9(1)-'superannuation fund'), OR
• ordinary savings, OR
• a superannuation payout on which lump sum tax has been paid.

Act reference: SSAct section 9(1)-'superannuation fund'

Types of income streams

The legislation classifies income streams into the following 3 categories:

• ATE income streams,
• asset tested income streams (long term), or
• asset tested income streams (short term).

ATE income streams

ATE products are assets test exempt and receive an income deduction based on purchase price.

ATEs are:

• lifetime products commencing at any age, or
• products based on a term of life expectancy, or between 15 years and life expectancy where life expectancy is greater than 15 years, commencing at or over age or service pension age, AND MUST have the following characteristics:
  • the income stream is paid at least annually for life or life expectancy,
  • payment must be fixed with any variation allowing for indexation specified in the contract and capped at the greater of 5% or (CPI +1)% but cannot be a negative value,
  • the purchase price must be wholly converted into annuity income,
  • there is no RCV,
  • non-commutable (except in limited circumstances),
  • cannot be transferred to another person (except a reversionary beneficiary),
  • cannot be transferred or used as security for borrowing, and
  • a reversionary or commutation component must not be greater than the benefit payable immediately before commutation.

Asset tested income streams (long term)

ATLTs don't meet all of the above characteristics but have terms over 5 years.

Exception: Where life expectancy is less than 5 years when the produce is entered into. ATLTs are asset tested and receive an income deduction based on purchase price.

Asset tested income streams (short term)

ATSTs are for terms of 5 years or less. ATSTs are asset tested and subject to the deeming rules.

Non-commutation funded income stream

A non-commutation funded income stream means an income stream that has not been purchased by directly transferring the proceeds from the commutation of another ATE income stream.

Act reference: SSAct section 9(1)-'income stream', section 9(1E) The secretary may determine…, section 9A Meaning of asset-test exempt income stream-lifetime income streams, section 9B Meaning of asset test exempt income stream-life expectancy income streams

Policy reference: SS Guide 4.8.1 Description of Superannuation, 4.9.1.20 General Provisions for Assessing Income Streams, 4.9.2.40 Commuting an Asset-Test Exempt Income Stream

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Last reviewed: 5 September 2011