Adding or updating a life expectancy income stream 108-05060040

A life expectancy income stream is guaranteed to be paid for a fixed period. The fixed term is based on the life expectancy rules and ranges specified in section 9B of the Social Security Act 1991. It is not a term income stream product (type TIS) for social security purposes.

Note: before 20 September 2004, complying life expectancy income streams were known as 15 year minimum term income streams. Providers previously reported these products as term products. From 20 September 2004, the 15 year minimum term rule no longer applies.

New life expectancy income streams cannot be purchased on or after 20 September 2007. However, under certain conditions, an existing asset-test exempt life expectancy income stream can be fully commuted and directly transferred (rollover) to a new life expectancy income stream. This complies with section 9B.

The following are not life expectancy income streams for social security purposes:

• account-based income streams (also known as an allocated pension)
• market-linked income streams (also known as a term allocated pension)
• lifetime income streams

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

For an income stream from a self managed superannuation fund (SMSF) or small APRA Fund (SAF), the trustee of the fund, (generally the customer for an SMSF), must complete the form. They may need 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.

Life expectancy income streams that comply with section 9B are non-commutable except in extremely limited circumstances.

• Life expectancy income streams that comply with section 9B 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 income streams purchased on or after 20 September 2007 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 asset-test exemption

Gross income - deduction amount = assessed income.

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.

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.

On reversion to a reversionary beneficiary or partner, the life expectancy income stream:

• is assessed from the day after date of death of the primary beneficiary (deceased spouse or partner), which is the date the customer (reversionary beneficiary) is entitled to receive the payments
• is treated as a continuation of the original income stream
• the purchase price, purchase date and relevant number are the same
• the gross income may be reduced as specified in the income stream contract

If the income stream complies with Section 9B, upon reversion the ATE status must be re-determined.

If the original purchase date was before 20 September 2004, the income stream is assessed in the hands of the reversionary beneficiary based on their characteristics and the characteristics of the income stream. The income stream will continue to have 100% ATE status where:

• the remaining term of the income stream (rounded up to the next whole number of years) is equal to the reversionary beneficiary’s life expectancy (rounded up to the next whole number of years), and
• the reversionary has reached Age Pension age

The above requirement does not apply to products purchased from 20 September 2004 and before 20 September 2007. If the income stream loses ATE status on reversion, it is assessed as a non-complying asset-tested income stream.

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 customer 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

The customer can invest the proceeds from the sale of the principal home in an income stream. If the customer intends to use some or all of the purchased income stream to buy their new home, see Sale of principal home.

Customers can advise of new life expectancy income streams via their Centrelink online account, however, they cannot make changes to existing life expectancy income streams online. Manual handoff occurs where a customer advises a new life expectancy income stream. A DOC with keyword OIAICS starts on the customer’s record and a work item for staff manual action will be generated on the customer's record containing details provided by the customer. Staff select the work item to process the update in Process Direct.