Commutation of asset-tested income streams 108-05060130

Asset-tested income streams do not comply with sections 9A, 9B or 9BA of the Social Security Act. They are non-defined benefit income streams and can be either account based or non-account based.

Exception: market-linked income streams, which are not eligible to retain asset-test exemption and are re-assessed as asset-tested will still have to comply with the requirements of section 9BA.

A partial commutation will change the deduction amount and the asset value for:

• a non-account based product, for example a lifetime income stream, life expectancy income stream or term income stream, the original purchase price is reduced by the commutation amount to recalculate the new asset value
• an account-based product such as an allocated income stream (other than a deemed (category 9) product), the asset value after a commutation is the account balance after the funds have been withdrawn

Asset-tested market-linked income streams (MLIs) are non-commutable except in extremely limited circumstances.

A Successor Fund Transfer (SFT) is where all members of a superannuation fund move to another superannuation fund. This includes members who have an income stream. The transfer can apply to all types of income streams, however, it typically applies to account-based income streams.

For an income stream recipient, there can be no change to the terms and conditions of the income stream product. The income stream will continue to have the same purchase date, purchase price, relevant number and total commutations as the original income stream. The only change would be to the provider name, Australian Business Number (ABN) and possibly the product reference number.

If the original income stream was grandfathered under the pre 1 January 2015 rules, and the customer continues to be receiving an income support payment when the income stream is transferred, the income stream will retain its grandfathered status.

Refer to the FINS Bulletin for a listing of SFT/IFTs.