Adding or updating a defined benefit income stream 108-05060060

Schedule needed for a defined benefit income stream

Has the customer and/or their partner provided a SA330 or the Defined Benefit Income Stream Schedule or a similar schedule providing details for each income stream?

• Yes, go to Step 3
• No, go to Step 2

• See Requesting information (CLK)
• The customer must provide a schedule for each income stream they own
• Ask for the information to be returned within 14 days

Note: where the customer or partner is unable, or unwilling, to provide information due to Family and domestic violence, escalate to AISR support. AISR support will escalate to arrange the request of the information directly from the provider.

Procedure ends here until documents returned.

Note: before a system release in December 2024, military invalidity pension (MYP) income streams were coded as defined benefit (DEF) income streams.

For New Claims: all updates are done within the new claim activity.

For current customers

Launch the Process Direct Income and Assets Update workflow. To do this access the customers record in Process Direct Customer Summary:

• Key START into the Super Key
• Select Income and Assets Update from the Task Selector
• Select Income Streams (SUPS/SUPI/SUPV)
• Select Start

Select Add to access the Create Income Streams (SUPS/SUPI/SUPV) screen.

Code the Income Stream Details:

• Product Type:
  • Select 'DEF - DEFINED BENEFIT'
• Income stream from SMSF/SAF?
  • Select No
• Provider or SMSF/SAF Name:
  • Select the appropriate Provider name from the drop-down list. Beginning to type part of the name will reduce the options. Note: the provider name may not be an exact match to the schedule. If a superannuation fund does not appear in the provider/fund name list in the first instance, please refer to FINS Bulletin page Successor Fund Transfer (SFT) page. If still unable to locate, refer to LPS for support as per normal BAU processes
• Provider or SMSF/SAF ABN:
  • This will auto-populate. Note: the ABN may not match the schedule
• Product Name:
  • Leave blank
• Product Reference Number:
  • The product reference number is unique to each income stream and may be shown as the product reference number, account number or policy number on the schedule
  • Make sure the correct product reference number is recorded exactly as it appears on the schedule
  • Do not code the provider ABN or product name as the product reference number
  • The number must be correct to enable correct bulk indexation updates
  • For information on recording Commonwealth Superannuation Reference Numbers in the correct format, see the Resources page for attached guide document
• Event Date/Commencement Date:
  • Code the commencement date
  • If a defined benefit income stream is acquired by a reversionary beneficiary, code the commencement date of the original income stream that is, when the primary partner started the income stream
  • Note: this is not the Event Date as indicated by the field title
• Purchase date:
  • Leave blank
• Term or Relevant Number:
  • Leave blank to allow the system to calculate the correct relevant number
  • The system will insert the life expectancy of the customer at the start date of the income stream. For partnered customers, the system will insert the life expectancy of the partner who has the longer life expectancy. Note: the relevant number is not needed for income streams started from 1 July 2007
• Section 9A/B/BA/BB Compliant Ind:
  • Select 'Yes'
  • Defined benefit income streams are 100% asset test exempt (ATE) regardless of start date
• Start Date Original Commuted Product:
  • Leave blank
• Product Cancellation Reason:
  • Leave blank when adding a new income stream

Select the date for the Event Date field using the following information.

Reversionary beneficiary

• The event date is the day after the date of death of the primary beneficiary (usually the deceased partner), which is the date the customer, (the reversionary beneficiary), is entitled to the income stream payment
• It can include lump sum arrears plus the regular ongoing payments
• Normally lump sum arrears are paid for the period from day after date of death to the date regular payments starts. Lump sum arrears are assessed as income from an income stream
• If it was the partners, the income stream is assessed from this date even though other income and assets are assessed at the end of the 16 week bereavement review where the customer does not advise the changes before the review
• Waiver provisions are effective from 9 May 2018:
  • If the assessment of lump sum arrears result in a debt during the bereavement period for the surviving spouse, give consideration to waiver provisions contained under Class of Debt, Section 1237AB(1) of the Social Security Act 1991. See the References for a link
  • All conditions in the legislation must be met
  • These waiver provisions cannot be used to waive debts outside the 14 week bereavement period, or debts which occurred before 9 May 2018
  • If it is possible to waive the debt, record the information on a NOTE. Debt Staff will make a decision
  • Note: if the date of reversion is prior to a CPI date that has passed, historical schedules will need to be requested. See Requesting information (CLK)

New claim

The Event Date will be the:

• date the income stream commenced where the:
  • customer has a partner who is current on an income support payment, Residential Care Assessment (RCA) or Low Income Health Care Card (LIC) before the start date, or
  • income stream commenced after the date of grant of the payment, or
  • income stream was purchased after the lodgement of an early claim
• lodgement date for an early claim
• the start date of the 8-week assessment period for LIC
• payment grant date in all other cases

Start of new income stream by existing customer

Invalidity or TPD pension:

• If lump sum arrears were paid, go to Step 5
• If no lump sum arrears were paid, the Event Date will be the start date of the ongoing payments

Non-invalidity or TPD pension:

• If lump sum arrears were paid, the Event Date is the first date included in the arrears
• If no lump sum arrears were paid, the Event Date is the start date of the ongoing payments

Previously undeclared income streams

The first Event Date will be the:

• date the income stream was purchased if the customer or partner were current on income support payment, Residential Care Assessment (RCA) or Low Income Health Care Card (LIC) before the purchase date, or
• earliest date of grant of income support payment, RCA or LIC for customer or partner if the income stream was purchased before this date

Note: if the customer and/or partner were or are only SHC/CUR-NOI and the product was purchased after any income support payment was cancelled, then historical details are not required nor is any historical coding needed.

Go to Step 6.

After approval of a customer’s invalidity pension, they will usually receive arrears of periodic payments for the period before approval. This can include years of back payment to the date of claim. Treat these arrears as ordinary income.

If a customer receive arrears of invalidity pension periodic payments as a lump sum:

• assess the arrears as ordinary income from the date received
• apply the income over a period equal to the arrears paid, up to a maximum of 52 weeks
• include any part of the arrears that relates to the period on or after approval as ongoing periodic payment
• adjust the assessment to avoid double counting

This includes payments received before the claim, where the assessment period continues after the grant date (for example, payments received within 12 months before grant).

Note: before 7 December 2020, arrears were assessed as income in the fortnight of receipt only.

See Income from personal injury insurance schemes and disability benefits for coding instructions for lump sum arrears of the periodic payments prior to approval.

• Channel Type: After saving the update automatically displays how the income stream was updated:
  • CSO if manually updated by Services Australia staff
  • ISP auto bulk updated with data sent by the provider, or
  • WEB if updated using information provided online
• Gross Income Amount:
  • Code the fortnightly gross income amount
  • It must include any additional amount a customer or their partner receives for their child
• Income Frequency:
  • Select 2WE – fortnightly. The income frequency must be fortnightly to enable bulk updates and indexation reviews
  • If the gross income reported by the provider is annual or monthly, calculate the fortnightly amount. If annual, divide the annual amount by 26. If monthly, multiply the monthly amount by 12 and divide the result by 26
• Super Child Amount:
  • Code the amount of any additional income stream payments received for children
  • The system will deduct this amount from the gross income amount when determining the assessable income for the customer
  • Leave blank if Nil
• Super Child Number:
  • Code the total number of children for whom additional payments are received
  • Leave blank if Nil

Undeducted Purchase Price field

Use this field to record the undeducted purchase price (UPP) of the income stream product. This field is needed in the following 2 situations:

• The provider has answered YES to 'Is the Tax-Free Component calculated using the old method based on UPP'. This will happen when:
  • the start date is before 1 July 2007, and
  • the customer is under 60, or the customer is over 60 and the income stream is from SA Super, SA Police or GESB WA
• The income stream commenced before 1 July 2007 and savings provisions apply

The UPP appears on the schedule. If the amount is not provided, it can be calculated in some cases.

• If the product provider or customer has not provided the UPP amount but has provided the fortnightly tax-free component amount calculated using the old method based on UPP, the UPP can be calculated using the following formula:
  • UPP = tax free component x 26 x relevant number
  • For single customers, the relevant number is the life expectancy of the person at the start date of the product
  • For partnered customers, the relevant number is the longest life expectancy of either partner at the start date of the product

Note: the Relevant Number Calculator can be used to determine:

• the UPP from the relevant number on the SUPS screen, and
• the TFC amount

In the Inc Ded Amt Calc Method field, code the method that will apply for the calculation of the tax free component as follows:

O - Calculated under the OLD method based on undeducted purchase price

• Use the code O when:
  • the start date is before 1 July 2007, and
  • the provider has indicated on the income stream schedule the tax free component is calculated using the old method based on UPP, and
  • the customer is under 60, or the customer is over 60 and the income stream is from SA Super, SA Police or GESB WA
• The tax-free component is calculated under the pre-1 July 2007 rules using the old method based on the undeducted purchase price (UPP)
• If this code is used the TFC New Method field should be blank or zero

S - Applies if the customer meets the criteria for the savings provision

• This will only apply if the customer meets the criteria for the savings provision
• Code the tax free component supplied by the income stream provider in the TFC New Method field. Use this code when all the following apply:
  • the Inc Ded Amt Calc Method has defaulted to 'O'
  • the provider has indicated on the income stream schedule the tax free component is calculated using the new proportional method
  • the fortnightly deductible amount on the customer's record calculated using the UPP is greater than the tax free component reported on the schedule
• The tax-free component calculated is under the old method using the undeducted purchase price (UPP)

I - Calculated under NEW proportional method, changes with indexation

• Code the tax free component supplied by the income stream provider in the TFC New Method field. Use this code when:
  • the provider has indicated on the income stream schedule the tax free component is calculated using the new proportional method, and
  • the Provider Name is not 'CSS' (Commonwealth Superannuation Scheme)
• The tax free component is calculated using the new proportional method and will change when the gross income amount changes as a result of indexation
• If this code is used, do not code the UPP in the Undeducted Purchase Price field

F - Calculated under NEW proportional method, applies to Provider CSS

• Code the tax-free component supplied by the income stream provider in the TFC New Method field
  • Use this code when the provider has indicated on the income stream schedule the tax-free component is calculated using the new proportional method, and
  • the Provider Name is 'CSS' (Commonwealth Superannuation Scheme)
• The deductible amount is calculated using the new proportional method and will not vary with the changes in the gross income amount
• It will remain the same permanently
• If this code is used, do not code the UPP in the Undeducted Purchase Price field

Z - Tax Free Component (Deductible amount) is Zero

• Use this code when the provider has indicated on the income stream schedule that there is no tax-free component. The tax-free component or deductible amount is zero
• When a new product is coded on the system, this field will default to 'Z' and must be changed if there is a tax-free component reported on the schedule
• If this code is used, the Undeducted Purchase Price field and the TFC New Method field should be blank or zero

TFC New Method field

Code the tax- free component calculated by the income stream provider using the new proportional method. This amount will be reported on the income stream schedule

• Code this field if the Inc Ded Amt Calc Method is an I, F, or S
• Update this field if the gross income amount is changed as a result of indexation and the Inc Ded Amt Calc Method field is I or S

TFC Old Method field

This displays the tax- free component under the old method. The amount in this field will display when the Undeducted Purchase Price field has a value recorded.

Deductible Amt (Income) field

The system calculates and displays the capped deductible amount (if the actual deductible amount is greater than 10% of the gross income amount) or the actual deductible amount (if 10% or less of the gross income amount). This amount is reduced from the gross income amount to determine assessable income

Exception: the 10% cap does not apply to the MBS and DFRDB defined benefit income streams

Other Deduction Type:

• Leave blank if no other deductions apply

Other Deduction Amount:

• Leave blank if no other deductions apply
• Special Rate Disability Pension (SRDP):
  • Recipients of SRDP from Department of Veterans' Affairs (DVA) may have a reduction to their SRDP entitlement due to their Commonwealth superannuation. E.g. DFRDB and MBS
  • The SRDP is reduced at 60% by an offset for the Commonwealth superannuation they receive. The amount of Commonwealth superannuation used to reduce the SRDP is exempt as income for Social Security purposes. The amount shown as Superannuation Offset on the SRDP letters can be used to determine the fortnightly amount allowed as an offset and exempt
  • Exception: If SRDP has reduced to NIL – then only the amount required to reduce the SRDP to Nil is exempt, see Resources for calculating the fortnightly reduction amount from DVA documents. This information needs to be included in the DOC when updates are finalised
• Family Law Split (FLS):
  • Depending on the agreement/court order involved, it is possible the superannuation fund has split the gross income and is only paying the customer their remaining share. For those cases no additional reduction is required
  • However if the superannuation fund was unable to split the payment then the fortnightly amount the customer must legally pay to the other party can be coded here to reduce the gross income assessed. For example: The payment may be a set amount of $200 per fortnight, or could be a 20%. See References for link to relevant instructions. This information needs to be included in the DOC when updates are finalised
• Both SRDP & FLS
• Add together both fortnightly deductions and code the total. This information needs to be included in the DOC when updates are finalised

• Assessable Income Amount field - system calculated: gross income amount – (deductible amount + other deductions amount) = assessable income
• Assessable Asset Amount field - will be blank as no asset value assessed
• Product Category field - automatically displays the category of the income stream for assessment purposes. System displays either:
  • 4 - Assets Test Exempt Defined Benefit Income Stream
  • 5 - Assets Tested Defined Benefit Income Stream. Note: although this category displays as assets tested, the income stream is 100% asset-test exempt due to the indefinite Ministerial exemption
• Select Save once updates made
• Update Receipt Date, Channel, Service Reason (If required) and select Save

• Check the Income Streams (SUPS, SUPI, SUPV) table displays the updated income stream details
• Select Assess
• Check the payment outcome is as expected on Entitlements (ELD), do not finalise if not, if determined accurate select Finish
  • If the Service Officer has used the Process Direct Income and Assets workflow, NOTES will be prepopulated automatically and display for review when Finish is selected
  • At this point, any more information can be added, as per Online Document Recorded (ODR)

Once NOTES are complete, Finalise. The transaction will complete and NOTES replicate to the Document List (DL).