Social Security (Partially Asset-test Exempt Income Stream — Exemption) Principles 2017
I, FINN PRATT, Secretary of the Department of Social Services, make these Principles under subparagraph 1118(1A)(a)(iii) of the Social Security Act 1991.
Dated 8 March 2017
Finn Pratt
Secretary of the Department of Social Services
Contents
Page
6 Income stream transferred to successor fund
7 Asset-test exempt income stream resulting from payment split
8 Asset-test exempt income stream resulting from Family Court order or injunction
10 Asset-test exempt income stream resulting from payment of hardship amount
These Principles are the Social Security (Partially Asset-test Exempt Income Stream ‑ Exemption) Principles 2017.
These Principles commence on 1 April 2017.
These Principles specify the criteria that an income stream, purchased during the period 20 September 2004 to 19 September 2007 (inclusive), must satisfy for it to be an asset-test exempt income stream for the purposes of section 1118 of the Social Security Act 1991. Section 1118 of the Act provides for certain assets to be disregarded in calculating the value of a person’s assets for the purposes of the assets test. Under paragraph (1) (d) of that section, the value of an asset‑test exempt income stream, other than a partially asset-test exempt income stream, is to be disregarded for the purposes of that calculation. An income stream that is not covered by these Principles is a partially asset‑test exempt income stream. Under paragraph 1118 (1) (da) of the Act, only half the value of a partially asset-test exempt income stream is to be disregarded for the purposes of the assets test.
In these Principles:
Act means the Social Security Act 1991.
benefit fund has the meaning given by subsection 16B (1) of the Life Insurance Act 1995.
defined benefit pension has the meaning given by regulation 9.04E of the Superannuation Industry (Supervision) Regulations 1994.
hardship amount has the meaning given by subsection 9A (7) of the Act.
immediate annuity has the meaning given by section 995-1 of the Income Tax Assessment Act 1997.
life company has the meaning given by the Dictionary to the Life Insurance Act 1995.
partner has the meaning given by subsection 4(1) of the Act.
regulated superannuation fund has the meaning given by subsection 10 (1) of the Superannuation Industry (Supervision) Act 1993.
self managed superannuation fund has the meaning given by subsection 10 (1) of the Superannuation Industry (Supervision) Act 1993.
statutory fund has the meaning given by section 29 of the Life Insurance Act 1995.
successor fund has the meaning given by subregulation 1.03 (1) of the Superannuation Industry (Supervision) Regulations 1994.
third party has the meaning given by section 90AB of the Family Law Act 1975.
5 Asset-test exempt income stream resulting from original asset‑test exempt income stream purchased before 20 September 2004
(1) These Principles cover an asset-test exempt income stream if:
(a) the income stream is covered by section 9A or 9B of the Act; and
(b) the income stream is purchased by the primary beneficiary during the period 20 September 2004 to 19 September 2007 (inclusive) from funds arising from the commutation of another asset-test exempt income stream (the original income stream); and
(c) the original income stream was purchased before 20 September 2004; and
(d) the original income stream is a kind of income stream in relation to which one of the following subsections applies.
(2) This subsection applies to an original income stream if:
(a) the income stream is covered by subsection 9A (1) or (1A) of the Act; and
(b) the income stream was purchased by the primary beneficiary for the benefit of the primary beneficiary and a reversionary beneficiary; and
(c) payments made under the income stream are calculated on the basis of the life expectancy of the reversionary beneficiary; and
(d) the reversionary beneficiary predeceases the primary beneficiary.
(3) This subsection applies to an original income stream if:
(a) the income stream is covered by subsection 9A (1) or (1A) of the Act; and
(b) the income stream is not an income stream to which section 7 or 8 of these Principles applies; and
(c) the income stream is purchased by the primary beneficiary for the benefit of the primary beneficiary and a reversionary beneficiary who, at the time of the purchase, are members of a couple together; and
(d) the primary beneficiary and reversionary beneficiary are no longer members of a couple together.
Example
On 1 March 2002, J purchased an income stream (the original income stream) covered by subsection 9A (1) of the Act for the benefit of J, the primary beneficiary, and H, the reversionary beneficiary. At the time of the purchase, J and H were members of a couple together. On 1 December 2004, J and H ceased to be members of a couple together. On 15 December 2004, J commutes the original income stream and purchases another income stream (the new income stream) covered by subsection 9A (1) of the Act. The new income stream is covered by these Principles.
(4) This subsection applies to an original income stream if:
(a) the income stream is a defined benefit pension covered by section 9A or 9B of the Act that is provided by a regulated superannuation fund; and
(b) the income stream is an income stream to which paragraph 9A (1) (b) or 9B (1A) (b) of the Act applies and in relation to which the Secretary is not satisfied as required by that paragraph.
Example
On 1 March 2002, P purchased an income stream (the original income stream) that is a defined benefit pension covered by section 9A of the Act that is provided by a regulated superannuation fund. Paragraph 9A (1) (b) of the Act applies to the original income stream. On 1 September 2005, the Secretary of the Department of Family and Community Services is not satisfied that the requirements of paragraph 9A (1) (b) of the Act are met in relation to the original income stream. On 15 September 2005, P commutes the original income stream to purchase another income stream (the new income stream) that is covered by section 9A of the Act. The new income stream is covered by these Principles.
Note Paragraphs 9A (1) (b) and 9B (1A) (b) of the Act require the Secretary to be satisfied, in relation to an income stream, that there is in force a current actuarial certificate stating that in the actuary’s opinion there is a high probability that the provider of the income stream will be able to pay the income stream as required under the income stream’s contract or governing rules.
(5) This subsection applies to an original income stream if:
(a) the income stream is an immediate annuity under a statutory fund established by a life company, or under a benefit fund; and
(b) the income stream:
(i) is an income stream to which paragraph 9A (1) (b) or 9B (1A) (b) of the Act applies and in relation to which the Secretary is not satisfied as required by that paragraph; or
(ii) fails to satisfy the standards set out in the Actuarial Standard 4.02 published by the Life Insurance Standards Board in March 2002 (that is, Minimum Surrender Values and Paid Up Values).
Note 1 Paragraphs 9A (1) (b) and 9B (1A) (b) of the Act require the Secretary to be satisfied, in relation to an income stream, that there is in force a current actuarial certificate stating that in the actuary’s opinion there is a high probability that the provider of the income stream will be able to pay the income stream as required under the income stream’s contract or governing rules.
Note 2 Actuarial Standard 4.02 may be viewed on the Australian Prudential Regulation Authority’s website (www.apra.gov.au).
6 Income stream transferred to successor fund
These Principles cover an asset-test exempt income stream if:
(a) the income stream is covered by section 9A or 9B of the Act; and
(b) the income stream results from the transfer, during the period 20 September 2004 to 19 September 2007 (inclusive), of another income stream (the original income stream) to a successor fund; and
(c) the original income stream was covered by section 9A or 9B of the Act; and
(d) the original income stream was provided by a regulated superannuation fund other than a self managed superannuation fund; and
(e) the original income stream:
(i) was purchased before 20 September 2004; or
(ii) was covered by these Principles.
7 Asset-test exempt income stream resulting from payment split
These Principles cover an asset-test exempt income stream if:
(a) the income stream is covered by section 9A or 9B of the Act; and
(b) the income stream is purchased by the primary beneficiary or the primary beneficiary’s partner (or former partner) during the period 20 September 2004 to 19 September 2007 (inclusive); and
(c) the income stream results from another asset-test exempt income stream (the original income stream) being commuted to give effect to an entitlement of the partner (or former partner) of the primary beneficiary in respect of the original income stream under a payment split under Part VIIIB of the Family Law Act 1975; and
(d) the original income stream was covered by section 9A or 9B of the Act; and
(e) the original income stream:
(i) was purchased before 20 September 2004; or
(ii) was covered by these Principles.
Example
On 1 March 2002, P, who was married to J at that date, purchased an income stream (the original income stream) covered by section 9A of the Act. On 1 December 2004, P and J divorce. P’s original income stream is commuted to give effect to an entitlement of J in respect of the original income stream under a payment split under Part VIIIB of the Family Law Act 1975. On 15 December 2004, J purchases an income stream (the new income stream) covered by section 9A of the Act. The new income stream is covered by these Principles.
8 Asset-test exempt income stream resulting from Family Court order or injunction
These Principles cover an asset-test exempt income stream if:
(a) the income stream is covered by section 9A or 9B of the Act; and
(b) the income stream is purchased by the primary beneficiary or the primary beneficiary’s partner (or former partner) during the period 20 September 2004 to 19 September 2007 (inclusive); and
(c) the income stream results from another asset-test exempt income stream (the original income stream) being commuted to give effect to an order made under section 79 or 114 of the Family Law Act 1975, or an injunction granted under section 114 of that Act, that is binding on a third party under Part VIIIAA of that Act; and
(d) the original income stream was covered by section 9A or 9B of the Act; and
(e) the original income stream:
(i) was purchased before 20 September 2004; or
(ii) was covered by these Principles.
9 Asset-test exempt income stream resulting from payment of superannuation contributions surcharge debt
These Principles cover an asset-test exempt income stream if:
(a) the income stream is covered by section 9A or 9B of the Act; and
(b) the income stream is purchased by the primary beneficiary during the period 20 September 2004 to 19 September 2007 (inclusive); and
(c) the income stream results from another asset-test exempt income stream (the original income stream) being commuted to pay a superannuation contributions surcharge debt; and
(d) the original income stream was covered by section 9A or 9B of the Act; and
(e) the original income stream:
(i) was purchased before 20 September 2004; or
(ii) was covered by these Principles.
10 Asset-test exempt income stream resulting from payment of hardship amount
These Principles cover an asset-test exempt income stream if:
(a) the income stream is covered by section 9A or 9B of the Act; and
(b) the income stream is purchased by the primary beneficiary during the period 20 September 2004 to 19 September 2007 (inclusive); and
(c) the income stream results from another asset-test exempt income stream (the original income stream) being commuted to pay a hardship amount; and
(d) the original income stream was covered by section 9A or 9B of the Act; and
(e) the original income stream:
(i) was purchased before 20 September 2004; or
(ii) was covered by these Principles.