Assessing life expectancy income streams paid from Self Managed Superannuation Funds (SMSFs) or Small APRA Superannuation Funds (SAFs) 108-05060090

For Complex Assessment Officer (CAO) use only

Check the Details of income stream product (SA330) form for the following:

• Question 26 - 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 10 - If provider indicates the type of income stream is life expectancy, go to Step 3

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.

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

Go to Step 4

Is the commencement date of the life expectancy income stream prior to 20 September 2004?

• Yes, see Step 2 in the Assessing income stream compliance table
• No, go to Step 5

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 Funds (SMSFs) and small APRA Superannuation Funds (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.

• Yes, see Step 5 in the Assessing income stream compliance table
• No, see Step 1 in the Assessing income stream compliance table

For Complex Assessment Officer (CAO) use only

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.

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

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

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 Step 1 in the Assessing the life expectancy income stream payments table

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.

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 Step 1 in the Assessing the life expectancy income stream payments table
• No, then the income stream is not compliant. Refer file back to the Service Officer and record details on a DOC. Procedure ends here

For Complex Assessment Officer (CAO) use only

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

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

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.

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

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

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

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 Step 1 of Assessing other life expectancy income stream criteria table.

For Complex Assessment Officer (CAO) use only

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

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

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

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

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

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

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.