1120AB

Value of asset‑tested income streams (lifetime) that are not managed investments

In force

(1)

This section applies to a person’s asset‑tested income stream (lifetime) in relation to a day that is on or after the person’s assessment day for the income stream.

Note 1:

For asset‑tested income stream (lifetime), see subsection 9(1). For assessment day, see subsections (6) and (7) of this section.

Note 2:

This section applies separately in relation to each asset‑tested income stream (lifetime) of a person.

(2)

However, this section does not apply to a family law affected income stream.

Note:

For family law affected income streams, see section 1120A.

Value of income stream

(3)

Subject to this section, the value of the person’s income stream is, for the purposes of the assets test, worked out as follows:

(a)

for a day in the period beginning on the person’s assessment day for the income stream and ending at the end of the person’s threshold day for the income stream:

Start formula Purchase amount times 0.6 end formula

(b)

for a day after the person’s threshold day for the income stream:

Start formula Purchase amount times 0.3 end formula

Note:

For threshold day, see subsections (9) and (10). For purchase amount, see subsection (12).

(4)

The Secretary may, by legislative instrument, determine one or more methods for working out the value of an asset‑tested income stream (lifetime) for persons to whom this section applies.

(5)

If one or more amounts worked out in accordance with the instrument are higher than the amount under subsection (3), then the value of the person’s income stream is, for the purposes of the assets test, the highest of those amounts.

Assessment day

(6)

Subject to subsection (7), for the purposes of this section, a person’s assessment day for an asset‑tested income stream (lifetime) is:

(a)

if the income stream arises under arrangements that are regulated by the Superannuation Industry (Supervision) Act 1993—the latest of the following:

(i)

the day the person first satisfies a condition of release that is mentioned in regulations under the Superannuation Industry (Supervision) Act 1993 and is of a kind determined in an instrument under subsection (8);

(ii)

the day the first amount was paid for the income stream;

(iii)

the day the person acquired the income stream (if no amount is identifiable as having been paid for the income stream); or

(b)

otherwise:

(i)

if the commencement day in relation to the income stream is before the day the person reaches pension age—the commencement day in relation to the income stream; or

(ii)

in any other case—the latest of the day the first amount was paid for the income stream, the day the person reaches pension age and the day the person acquired the income stream (if no amount is identifiable as having been paid for the income stream).

Note:

For commencement day, see subsection 9(1).

(7)

For the purposes of this section, a person’s assessment day for an asset‑tested income stream (lifetime) that reverted to the person as a reversionary beneficiary is:

(a)

if the income stream reverted to the person on or after the commencement day in relation to the income stream—the day of the reversion; or

(b)

if the income stream reverted to the person before the commencement day in relation to the income stream and the income stream arises under arrangements that are regulated by the Superannuation Industry (Supervision) Act 1993:

(i)

if the commencement day in relation to the income stream is before the day the person first satisfies a condition of release that is mentioned in regulations under the Superannuation Industry (Supervision) Act 1993 and is of a kind determined in an instrument under subsection (8)—the commencement day in relation to the income stream; or

(ii)

in any other case—the later of the day of the reversion and the day the person first satisfies a condition of release that is mentioned in regulations under the Superannuation Industry (Supervision) Act 1993 and is of a kind determined in an instrument under subsection (8); or

(c)

if the income stream reverted to the person before the commencement day in relation to the income stream and the income stream does not arise under arrangements that are regulated by the Superannuation Industry (Supervision) Act 1993:

(i)

if the commencement day in relation to the income stream is before the day the person reaches pension age—the commencement day in relation to the income stream; or

(ii)

in any other case—the later of the day of the reversion and the day the person reaches pension age.

Note:

For commencement day, see subsection 9(1).

(8)

The Secretary may, by notifiable instrument, determine a kind of condition of release for the purposes of subparagraphs (6)(a)(i) and (7)(b)(i) and (ii).

Threshold day

(9)

Subject to subsection (10), for the purposes of this section, a person’s threshold day for an asset‑tested income stream (lifetime) is worked out using the following method statement:

Method statement

Step 1. Work out, in relation to a man aged 65 on the person’s assessment day for the income stream, the number of expected years remaining in the man’s life, by reference to the instrument in force under subsection (11) on that assessment day, rounded down to the nearest whole number of years.

Note:

The number of expected years remaining in a 65‑year old man’s life is used no matter how old the person is and whether the person is a man or a woman.

Step 2. Increase the number of years at step 1 by 65.

Step 3. Subject to step 4, the person’s threshold day for the income stream is the later of the following days:

(a)

the day before the person reaches the age in years worked out at step 2;

(b)

the last day of the 5‑year period beginning on the person’s assessment day for the income stream.

Step 4. If the income stream is a joint income stream, the person’s threshold day for the income stream is the later of the following days:

(a)

the day before the oldest of the persons, to whom a proportion of the income stream is attributable on the person’s assessment day for the income stream, reaches the age in years worked out at step 2;

(b)

the last day of the 5‑year period beginning on the person’s assessment day for the income stream.

(10)

If:

(a)

an asset‑tested income stream (lifetime) reverts to a person as a reversionary beneficiary on the death of another person; and

(b)

before the death of the other person, the other person’s assessment day for the income stream had occurred;

then:

(c)

if, before the death of the other person, the other person’s threshold day for the income stream had not occurred—the reversionary beneficiary’s threshold day for the income stream is taken to be the day that would have been the other person’s threshold day if the other person had not died; and

(d)

if, before the death of the other person, the other person’s threshold day for the income stream had occurred—the reversionary beneficiary’s threshold day for the income stream is taken to be the other person’s threshold day; and

(e)

if the reversionary beneficiary’s assessment day for the income stream worked out under subsection (7) is on or after the reversionary beneficiary’s threshold day for the income stream worked out under paragraph (c) or (d) of this subsection:

(i)

paragraph (3)(a) is taken not to apply to the reversionary beneficiary and the income stream; and

(ii)

paragraph (3)(b) is taken to apply to the reversionary beneficiary and the income stream for a day that is on or after the reversionary beneficiary’s assessment day for the income stream.

(11)

The Secretary may make a notifiable instrument for the purposes of step 1 of the method statement in subsection (9). If there are Life Tables published by the Australian Government Actuary, the Secretary must be satisfied that the instrument is consistent with the latest of those Life Tables.

Purchase amount

(12)

For the purposes of this section, the purchase amount for the income stream is:

(a)

subject to paragraph (b)—if one or more amounts have been paid for the income stream—the sum of:

(i)

each compounded amount in relation to an amount paid for the income stream before the person’s assessment day for the income stream, as worked out under subsection (13); and

(ii)

each amount paid for the income stream on or after that assessment day;

less any commuted amounts; or

(b)

if the circumstances determined in an instrument under subsection (15) apply in relation to the income stream—the amount worked out in accordance with that instrument.

(13)

A compounded amount in relation to an amount paid for the income stream before the person’s assessment day for the income stream is worked out by applying the following formula for each relevant adjustment day (from the earliest to the latest):

Start formula Compounded amount for the relevant adjustment day times open bracket 1 plus Relevant above threshold rate for the relevant adjustment day close bracket end formula

where:

compounded amount for the relevant adjustment day means:

(a)

for the earliest relevant adjustment day—the amount that was paid for the income stream; or

(b)

for each later relevant adjustment day—the result of applying the formula for the most recent earlier relevant adjustment day.

relevant above threshold rate for the relevant adjustment day means:

(a)

if the relevant adjustment day is a 12‑month anniversary of the relevant payment day—the rate applicable under subsection 1082(2) for that relevant adjustment day, expressed as a decimal fraction; or

(b)

if the relevant adjustment day is the assessment day—the amount worked out in accordance with the following formula:

Start formula The rate applicable under subsection 1082(2) for that day, expressed as a decimal fraction times start fraction Relevant number of days over 365 end fraction end formula

relevant adjustment day means each of the following:

(a)

each 12‑month anniversary of the relevant payment day that happens before the person’s assessment day;

(b)

the person’s assessment day.

Note:

For assessment day, see subsections (6) and (7).

relevant number of days means the number of days in the period:

(a)

beginning on the day after:

(i)

if the assessment day is at least 12 months after the relevant payment day—the most recent 12‑month anniversary of the relevant payment day; or

(ii)

otherwise—the relevant payment day; and

(b)

ending at the end of the assessment day.

relevant payment day means the day that the amount was paid for the income stream.

(14)

If the income stream is a joint income stream, then, for the purposes of applying subsections (12) and (13) to the person and to a day covered by subsection (1), an amount paid for the income stream is taken to be that amount multiplied by the proportion of the income stream attributable to the person on that day.

(15)

The Secretary may make a legislative instrument for the purposes of paragraph (12)(b).

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