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Assessing life expectancy income streams paid from a self-managed superannuation fund (SMSF) or small APRA fund (SAF) 108-05060090

For Complex Assessment Officer (CAO) use.

This page contains information on the steps to be taken when assessing life expectancy income streams paid from self-managed superannuation fund (SMSF) or small APRA fund (SAF).

On this page:

Assessing life expectancy income streams from SMSFs of SAFs

Assessing income stream compliance

Assessing the life expectancy income stream payments

Other assessment criteria for life expectancy income streams

Assessing life expectancy income streams from SMSFs or SAFs

Table 1

Step	Action
1	Check the SA330 For Complex Assessment Officer (CAO) use. Check the Details of income stream product (SA330) form for the following: Question 30 - if income stream does not meet all characteristics required under Section 9B of the Social Security Act, see the References page. Go to Step 2 Question 24 - If provider indicates the type of income stream is life expectancy, go to Step 3
2	Not 9B Compliant This income stream is not 9B compliant, i.e. asset-test exempt. Return file to the Service Officer. Record details on a DOC. Procedure ends here.
3	Cross check source information Cross check all of the source documentation, that is, Trust Deed/Contract/Trustee Resolution/Minutes/Agreements etc. to ensure that: the trust deed allows for payment of the relevant pension the income stream details provided in all documentation is uniform and correct Note: If the income stream governing rules are changed to match, or are reliant upon the Superannuation Industry (Supervision) (SIS) Regulations 1994 or Retirement Savings Accounts Regulations 1997, in allowing commutations during the 5 year grace period from 7 December 2024, the life expectancy ATE income stream will be non-compliant with section 9B, but they will retain their ATE status via disallowable instrument. Go to Step 4
4	Commencement date before 20 September 2004 Is the commencement date of the life expectancy income stream prior to 20 September 2004? Yes, see Table 2 > Step 2 No, go to Step 5
5	Commencement date on or after 20 September 2004 Is the commencement date of the life expectancy income stream on, or after, 20 September 2004 and before 1 January 2006? Note: self-managed superannuation fund (SMSF) or small APRA fund (SAF) are not permitted under the Superannuation Industry (Supervision) (SIS) Act 1993 to offer compliant life expectancy income streams on or after 1 January 2006. Yes, see Table 2 > Step 5 No, see Table 2 > Step 1

Assessing income stream compliance

Table 2

Step	Action
1	Compliant life expectancy income streams For Complex Assessment Officer (CAO) use. SMSFs and SAFs are not permitted under the Superannuation Industry (Supervision) (SIS) Act 1993 to offer compliant life expectancy income streams on or after 1 January 2006. There are exceptions. For more information about eligibility criteria and conditions for relief, see the References page. Has the income stream been purchased using the proceeds from the commutation of another asset-test exempt income stream and is it eligible to retain asset-test exemption? Yes, go to Step 5 No, the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here.
2	Age Pension age Was the owner of the income stream under Age Pension age on the date of purchase? Yes, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here No, go to Step 3
3	Term of income stream Does the term of the income stream (relevant number) match one of the following: the life expectancy of the primary beneficiary (may be rounded up to the next whole number), or between 15 years and the life expectancy of the primary beneficiary where life expectancy is greater than 15 years (may be rounded up to the next whole number)? Yes, go to Step 4 No, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here
4	Transferable income stream Does the documentation allow for the income stream to be transferred to someone other than the reversionary beneficiary and only on the death of the primary beneficiary or another reversionary beneficiary? Yes, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here No, see Table 3 > Step 1
5	Reversionary partner Does the documentation specify a reversionary partner, and can the income stream be transferred only to the reversionary partner on the death of the primary beneficiary? Yes, go to Step 6 No, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here.
6	Term of income stream Does the term of the income stream (relevant number) match one of the following: a term (at purchase) between the life expectancy of the primary beneficiary and the life expectancy of a person five years younger than the primary beneficiary (may be rounded up to the next whole number) where a reversionary partner has been specified, a term (at purchase) between the life expectancy of the primary beneficiary and the life expectancy of a person five years younger than the primary beneficiary (may be rounded up to the whole next number), or a term (at purchase) between the life expectancy of the reversionary partner and the life expectancy of a person five years younger than the reversionary partner (may be rounded up to the whole next number) Yes, see Table 3 > Step 1 No, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here

Assessing the life expectancy income stream payments

Table 3

Step	Action
1	Payment frequency For Complex Assessment Officer (CAO) use. Are the payments from the life expectancy income stream paid at least annually? Yes, go to Step 2 No, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here
2	First payment Did the first payment relate to the period commencing on the day that the income stream was purchased or acquired i.e. the first payment was not been deferred? Yes, go to Step 3 No, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here
3	Total amount in first year Was the total amount to be paid by the income stream in the first year specified in the documentation? Yes, go to Step 4 No, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here.
4	Payment variations (less) Can the total amount of payments in a year be less than what was paid the previous year, other than as a result of the following causes? A reduction in payments resulting from an allowable commutation A reduction in payments resulting from death of a joint owner Yes, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here No, go to Step 5
5	Payment variations (more) Can the total amount of payments in a year be more than what was paid the previous year, other than as a result of indexation? Yes, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here No, go to Step 6
6	Payment indexation If the income stream allows for the indexation of payments, can the payments be indexed by more than the greater of 5% or Consumer Price Index (CPI) + 1? Yes, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here No, go to Step 7
7	Payments other than regular payments Are there any amounts to be paid from the income stream other than the regular payments, e.g. a residual capital value? Yes, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here No, see Table 4 > Step 1

Other assessment criteria for life expectancy income streams

Table 4

Step	Action
1	Income stream commutation For Complex Assessment Officer (CAO) use. An income stream can be commuted in the following circumstances: within the first six months following the commencement day where the income stream is non commutation funded when it is rolled to another asset-test exempt (ATE) income stream to pay the superannuation contribution surcharge or a hardship amount to the extent necessary to pay the person's partner or former partner under a payment split due to a property settlement on relationship breakdown, or within the guarantee period to a reversionary beneficiary or the estate of the primary beneficiary on the death of the primary beneficiary Is the income stream commuted for any other reason? Yes, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here No, go to Step 2 Note: If the income stream governing rules are changed to match, or are reliant upon the Superannuation Industry (Supervision) (SIS) Regulations 1994 or Retirement Savings Accounts Regulations 1997, in allowing commutations during the 5 year grace period from 7 December 2024, the life expectancy ATE income stream will be non-compliant with section 9B, but they will retain their ATE status via disallowable instrument.
2	Security for borrowing Can the income stream be used as security for borrowing? Yes, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here No, go to Step 3
3	Income stream on death of primary beneficiary If the income stream is commuted or transferred on the death of the primary beneficiary, can the amount paid be greater than the net present value of the remaining payments immediately prior to the commutation or transfer? Yes, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here No, go to Step 4
4	Actuarial certificate The actuarial certificate must provide the following to be compliant: The specified 'in force' period of the certificate of not more than 12 months duration A statement that the SMSF or SAF has a high probability that it can meet the income stream payments specified under the contract or governing rules Does the actuarial certificate provide these details? Yes, go to Step 5 No, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here
5	Currency of actuarial certificate The actuarial certificate must be: current, that is, within the 'in force' period, or within the grace period of 26 weeks following the end of the 'in force' period? Does the actuarial certificate meet these requirements? Yes, go to Step 6 No, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here
6	Return of purchase price Compare this figure to the purchase price of the income stream. An approximate calculation for the return of purchase price is based on the term of the income stream product multiplied by the gross annual income amount of the income stream product. For help with calculating the result, contact the Financial Industry and Network Support (FINS) Helpdesk. The purchase price must be returned as income over the term of the product for life expectancy products. If the calculated figure is equal to or higher than the purchase price of the income stream, the income stream meets the 'return of purchase price' requirement for an ATE income stream If the calculated figure is lower than the purchase price of the income stream, the income stream does not meet the 'return of purchase price' requirement for an ATE income stream. Therefore, the income stream product: cannot be asset-test exempt, and must be assessed as an asset-tested (long term) income stream Contact the FINS Helpdesk to check accuracy of the calculated figure and before any reassessment Go to Step 7
7	Return file Return file to the Service Officer, with details of the CAO's recommended assessment of the asset-test exempt income stream from the SMSF or SAF. The recommendation should be completed on the CAO's report and details recorded on a DOC.