Adding or updating a lifetime income stream 108-05060030

A lifetime income stream is guaranteed to be paid for the owner's lifetime and stops on their death. A reversionary beneficiary can be nominated:

• these payments will continue on the death of the primary beneficiary, and
• will be paid to the reversionary(s) during their lifetime

This product is not a life expectancy income stream.

It can be purchased with both superannuation money and ordinary savings.

Pooled lifetime income streams are lifetime income streams with a purchase date on or after 1 July 2019. They are assessed under new means test rules. A self-managed superannuation fund (SMSF) or small APRA superannuation fund (SAF) cannot pay pooled lifetime income streams.

The income stream provider must provide details of the income stream on a Details of income stream product (SA330) form or a similar schedule.

A SA330 can be used for details of an income stream from a self-managed superannuation fund (SMSF) or small APRA superannuation fund (SAF). The SA330 must be completed by the trustee of the fund (generally the customer for an SMSF). They can get help from their accountant or financial adviser.

Some SMSFs may have a retail provider as their administrator. For example, AXA, MLC, who may complete the form.

Do not accept a schedule for a non-SMSF sourced income stream if completed by a financial adviser, accountant or any other person.

Lifetime income streams that comply with section 9A of the Social Security Act 1991 are non-commutable except in extremely limited circumstances.

Lifetime products purchased on or after 1 July 2019 will be subject to the pooled lifetime income streams means testing.

Lifetime income stream products purchased or acquired before 1 July 2019 are grandfathered. They continue to be assessed under the pre-1 July 2019 means test rules.

This assessment relates to all lifetime products purchased before 1 July 2019. The income stream is still assessed according to its purchase date even if a reversionary beneficiary starts to receive the income after 1 July 2019.

Gross income - deduction amount = assessed income.

• Lifetime income streams that comply with section 9A are asset-test exempt (ATE) income streams. ATE income streams purchased:
• before 20 September 2004 are 100% ATE
• on or after 20 September 2004 and before 20 September 2007 are 50% ATE
• All lifetime income streams purchased on or after 20 September 2007 and before 1 July 2019 are fully assessed using an asset assessment formula.
  Exception: in very limited circumstances, certain ATE income streams purchased before 20 September 2007 that are commuted and rolled over into post 20 September 2007 ATE income streams can retain their 50% or 100% ATE status provided certain conditions are satisfied. The References page contains a link to the conditions for retention of the ATE status

Joint income streams can only be purchased with ordinary money, and not superannuation money. The income stream payments are made to each owner of the joint income stream. An income stream that has a single owner with a reversionary beneficiary is not a joint income stream.

The purchase price and the gross income are halved and recorded on the customer's and the partner's record. The relevant number is the same for both. The product name field should identify the product as a jointly owned income stream.

Note: if the product does not comply with section 9A, it may have a residual capital value. This should be halved as well.

Requests for information to update income streams owned by a non-current partner are sent to the customer.

Where the customer or partner is unable, or unwilling, to provide information due to family and domestic violence, escalate to Automation of Income Stream Reviews (AISR) support. AISR support will request the information directly from the provider.

The original purchaser of the income stream may nominate a person to receive the income after their death, for example their spouse or partner. This person is the reversionary beneficiary.

When an income stream is passed on to a reversionary beneficiary:

• Income is assessed from the day after the date of death of the primary beneficiary (deceased spouse or partner), which is the date the customer (reversionary) is entitled to receive the payments
• The income stream is treated as a continuation of the original income stream. If it was originally purchased before 1 July 2019, but reverted after 1 July 2019, the pre 1 July 2019 assessment will continue
• The ATE status, purchase price, purchase date and relevant number remain unchanged
• The gross income may be reduced as specified in the income stream contract

There may be a gap between the death of the original beneficiary and the date the reversionary beneficiary starts to receive regular payments. A lump sum arrears payment is made to the reversionary beneficiary to cover the gap. The lump sum is assessed as income from an income stream for the period to which it relates. This may result in a debt if the person has been receiving an income support payment.

Waiver provisions came into effect from 9 May 2018:

• where the lump sum arrears results in a debt during the bereavement period for the surviving spouse, and certain conditions are met
• only debts within the 14 week bereavement period can be waived under these rules

The 9 May rules are not retrospective. Any of these debts occurring before 9 May 2018 cannot be waived using these rules.

See the References page for a link to the legislation

A Successor Fund Transfer (SFT) is where all members of a superannuation fund move to another superannuation fund. This includes members who have an income stream.

For an income stream recipient, there can be no change to the terms and conditions of the income stream product. The income stream will continue to have the same start date as the original income stream. The only change would be to the provider name and possibly the product reference number. The exemption from the assets test would continue to apply to the income stream.

Refer to the FINS Bulletin for a listing of SFT/IFTs.

An income stream provider may suspend the customer's income stream for either:

• failure to confirm proof of life
• returned correspondence

If a provider has suspended a customer's income stream, the customer must contact the provider to:

• restart the payment, and
• get paid any arrears

The customer's income stream is not zeroed off on the system when a suspension occurs.

When the provider pays the arrears to the customer, no coding is needed on the customer's record.

Customer's past fortnightly payments are already adjusted to account for the income from their lifetime income stream.

Customers can advise of new lifetime income streams via their Centrelink online account, however they cannot make changes to existing lifetime income streams online. Manual handoff will occur where a customer advises a new lifetime income stream. A DOC with keyword OIAICS will start on the customer’s record and a Work Item for staff to manual action is generated on the customer's record containing the details given by the customer. Staff can select the Work Item to process in Process Direct.