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Actuarial valuations 108-04110000

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This document outlines situations where an actuarial valuation is required. The Complex Assessment Officer (CAO) will refer relevant cases to the Australian Government Actuary (AGA) for a formal valuation if required.

Assessing income and assets from a life interest

This table describes the procedure for assessing and coding the income and assets from a life interest.

Item

Description

1

Income from a life interest + Read more ...

The income from a life interest can be coded as other ordinary income.

If an income stream is being surrendered, the following procedure should be used:

  • capitalise the amount by using the granny flat quasi life tables
  • calculate the deemed rate of income on the capitalised amount
  • compare total income including the actual income foregone with the income impact level
  • compare total income (including the deemed rate) with the income impact level
  • compare total assets including the capitalised value of the income stream with the asset impact level

2

Assets from a life interest + Read more ...

If there is a likely effect on the rate under the Assets Test, then there is a need to obtain an actuarial valuation.

The actuarial value from a life interest can be coded as other assets.

When there is no income stream produced by the life interest, for example, a life interest in a residential property paying no rent, establish the current value of the assets of the life estate and income which could be derived such as the commercial lease/rental value (obtain a valuation if this has not been done) based on the following steps:

  • Calculate the approximate asset value based on the estimated income (for example, commercial lease or rental value) multiplied by life expectancy
  • Compare total assets of the customer including the current value of the assets of the life estate with the asset impact level

Where the life interest is in an income producing asset an actuarial valuation of the actual income stream and assessment of the income derived by the assets of the life estate must be performed.

Where a formal actuarial valuation is considered unnecessary under these rules, the customer's record must be noted for review of the life interest if the income or assets of the customer increase.