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This topic covers:
Calculate assessable asset values for member (1.1.M.118) (primary FLA) and non-member (1.1.N.115) (secondary FLA) respectively as follows:
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Step |
Description |
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1 |
Ascertain the percentages specified in the payment split (e.g. 60%-40%).
The percentages indicate the proportions (MPROP, NMPROP) in which the member's original interest is apportioned respectively between the member and the non-member. |
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2 |
Calculate the asset values for both primary FLA (1.1.P.385) and secondary FLA (1.1.S.65) using the formula:
Asset value (primary FLA) = MPROP x Account balance of original FLA at the operative time
Asset value (secondary FLA) = NMPROP x Account balance of original FLA at the operative time. |
Although there are 2 FLA income streams (1.1.F.50) (i.e. the primary FLA and secondary FLA), effectively there is only one account balance backing both FLA income streams. The asset value for each FLA income stream is the portion of the account balance at that time which backs the primary and/or secondary FLA.
As with income streams that are not subject to a divorce property split, the asset values for the member's primary FLA (1.1.P.385) and the non-member's secondary FLA (1.1.S.65) will need to be reassessed at 6 or 12 month intervals depending on whether the income stream payments are received either:
The first 6 (or 12) monthly interval for the new primary FLA and/or secondary FLA is dated from the previous review date for the original FLA (1.1.O.35), i.e. not the operative time (1.1.O.25) when the payment split occurred.
The member may commute part of the original income stream after the operative time. The family law provisions require that such commuted amounts be apportioned between the primary FLA (1.1.P.385) and the secondary FLA (1.1.S.65) in the percentages resulting from the original 'percentage payment split'.
The asset value maintained for each FLA income stream (1.1.F.50) will be the portion of the remaining account balance that backs each FLA income stream immediately after the commutation.
Calculate assessable income for member (1.1.M.118) (primary FLA) and non-member (1.1.N.115) (secondary FLA) respectively as follows:
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Step |
Description |
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1 |
Calculate NPP (1.1.N.135) of original FLA (1.1.O.35) respectively at operative time (1.1.O.25) as follows:
NPP of original FLA at operative time = NPP of original FLA at commencement day - any commutations prior to operative time |
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2 |
Calculate the NPP for primary FLA (1.1.P.385) and secondary FLA (1.1.S.65) respectively at the operative time:
MNPP (primary FLA) = MPROP x NPP of original FLA at operative time
NMNPP (secondary FLA) = NMPROP x NPP of original FLA at operative time
Where: - MPROP is the proportion of the original FLA awarded to the member, - NMPROP is the proportion of the original FLA awarded to the non-member. |
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3 |
Calculate deduction amount for primary FLA and secondary FLA respectively as follows:
Member (deduction amount) = NPP of primary FLA at operative time/relevant number
Non-member (deduction amount) = NPP of secondary FLA at operative time / relevant number
Where relevant number is the relevant number of the original FLA (1.1.O.35) at its commencement day (1.1.C.205). |
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4 |
Obtain gross income for primary FLA and secondary FLA respectively at the time of the assessment. |
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5 |
Reduce gross income from the primary FLA and secondary FLA respectively by the respective deduction amounts. |
The member may commute part of the original income stream after the operative time. The family law provisions require that such commuted amounts be apportioned between the primary FLA (1.1.P.385) and the secondary FLA (1.1.S.65) in the percentages specified in the original percentage payment split.
After the commutation is made, the new gross income amount must be obtained from the fund trustee for both the member (primary FLA) and non-member (secondary FLA). The NPP (1.1.N.135) for each member and non-member must be reduced by his or her share of the commutation. This variation to NPP will mean that the deduction amount (and assessable income) for each member and non-member will also have to be adjusted.
Example: Henry buys an allocated pension from XYZ superannuation fund on 1 January 1998.
Purchase price: $100,000
Gross annual income: $12,050
Relevant no: 15.41
Five years after purchasing his allocated pension (1 January 2003), Henry and Wilma divorced. Court orders a percentage payment split with 60 per cent of payments going to Henry and 40 per cent of payments going to Wilma. No commutations were made between the commencement date and the operative time. Operative time is 1 January 2003. Account balance at the operative time was $80,000.
Assets test
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Step |
Description |
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1 |
Ascertain the percentages specified in the payment split (e.g. 60% - 40%). Henry's proportion of the payment split is 60%. Wilma's proportion of the payment split is 40%. |
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2 |
Calculate the asset value for both primary FLA and secondary FLA using the formula:
Asset value (primary FLA) = MPROP x Account balance of original FLA at the operative time
Asset value (secondary FLA) = NMPROP x Account balance of original FLA at the operative time Asset value (Henry) = 0.60 x $80,000 = $48,000 Asset value (Wilma) = 0.40 x $80,000 = $32,000
Henry's asset value at the operative time is $48,000. Wilma's asset value at the operative time is $32,000. |
Income test
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Step |
Description |
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1 |
Obtain from the provider the new gross income for the primary FLA (member) and secondary FLA (non-member).
In this example: Henry's new annual gross income as advised by the provider is $6,300. Wilma's annual income is $4,200. |
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2 |
Calculate the NPP of the original FLA income stream (original FLA) at the operative time using the formula:
NPP of original FLA at operative time = NPP of original FLA at commencement day - any commutations prior to operative time
In the example above, as no commutations were made from the commencement date up to the operative time, the NPP of the original FLA income stream is $100,000. |
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3 |
Calculate NPP for both primary FLA (member) and secondary FLA (non-member) at the operative time: MNPP (primary FLA) = MPROP x NPP of original FLA at operative time
NMNPP (secondary FLA) = NMPROP x NPP of original FLA at operative time
Where: MPROP is the proportion of the original FLA awarded to the member, NMPROP is the proportion of the original FLA awarded to the non-member.
MNPP (Henry) = 0.60 x $100,000 = $60,000 (Henry's NPP at the operative time)
NMNPP (Wilma) = 0.40 x $100,000 = $40,000 (Wilma's NPP at the operative time) |
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4 |
Calculate deduction amount for each split income stream:
Member (deduction amount) = NPP of primary FLA at operative time/relevant number
Non-member (deduction amount) = NPP of secondary FLA at operative time/relevant number
MDA (Henry): $60,000 / 15.41 = $3,894 NMDA (Wilma): $40,000 / 15.41 = $2,596 |
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5 |
Calculate assessable income by reducing the gross income of both the primary FLA (member) and secondary FLA (non-member) by the deduction amount calculated for each income stream.
M assessable income (Henry): $6,300 - $3,894 = $2,406 NM assessable income (Wilma): $4,200 - $2,596 = $1,604 |
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Last reviewed: 1 February 2010
