Income streams

A regular series of payments made to you directly from accumulated superannuation contributions or purchased using either superannuation or ordinary monies.

Types of income streams

Income streams include:

  • account based pensions also known as allocated pensions
  • account based annuity also known as allocated annuity
  • market linked pension also known as term allocated pension
  • annuities
  • defined benefit pension for example ComSuper pension, State Super pension
  • superannuation non-defined benefit pension

There are 2 main types of income streams:

Superannuation pensions

Superannuation pensions are income streams that are paid from a superannuation fund.

Annuities

Annuities are income streams purchased from life insurance companies with either ordinary money or superannuation money.

Income stream categories

Income streams are classified into 3 categories for assessment purposes according to their individual characteristics. Each category has income and asset test requirements.

Asset Test Exempt and Partially Asset Test Exempt

An Asset Test Exempt or Partially Asset Test Exempt income stream must meet all the required characteristics specified in Sections 9A or 9B or 9BA of the Social Security Act.

Asset Test

  • the value of your Asset Test Exempt income streams is not counted as an asset under the assets test if it was purchased before 20 September 2004
  • half the value of your Partially Asset Test Exempt income stream is counted as an asset under the assets test if it was purchased between 20 September 2004 and before 20 September 2007
  • income streams purchased on or after 20 September 2007 cannot be classified as Asset Test Exempt or Partially Asset Test Exempt

Income test

  • the assessable income of non-defined benefit income streams is calculated by reducing the gross annual payments by the deduction amount that reflects a return of the purchase price
  • the assessable income of defined benefit income streams is calculated by reducing the gross payment by the deductible amount which is equal to the tax free component of your income stream under tax law, as calculated by your superannuation fund

Asset Tested Long Term

An Asset Tested Long Term income stream is any income stream which is not an Asset Test Exempt or Partially Asset Test Exempt income stream and has:

  • a term of greater than 5 years or
  • a term of 5 years or less where the term is greater than or equal to your life expectancy

Asset Test

  • long term income streams are fully asset tested
  • if your income stream payments are backed by an account balance, for example, account-based income streams and market linked income streams, the asset value is the account balance
  • if your income stream does not have a current account balance, the asset value is based on the purchase price of the income stream, which is reduced every 6 or 12 months by the amount of the purchase price that has been returned to you
  • if your income stream has a residual capital  value the asset value cannot be less than this amount

Income Test

  • assessable income is calculated by reducing the gross annual payments by the deduction amount that reflects a return of the purchase price
  • from 1 January 2015, your account-based income stream will be treated as a financial asset and assessed using the deeming rules
  • If you are receiving a pension or allowance and have an account-based income stream before 1 January 2015 and continuously receive it after this date, the product you hold will continue to be assessed under the return of purchase price rules

Asset Tested Short Term

An Asset Tested Short Term income stream is any income stream which is not an Asset Test Exempt, Partially Asset Test Exempt income stream or Asset Tested Long Term income stream. The term is 5 years or less.

Asset Test

  • Short term income streams are fully asset tested
  • The asset value is based on the purchase price of the income stream, which is reduced every 6 or 12 months by the amount of the purchase price that has been returned to you
  • if your income stream has a residual capital value (RCV), the asset value cannot be less than this amount

Income Test

  • the asset value of your income stream is treated as a financial asset and added to the value of your other financial assets. The deeming rules will apply

These are general guidelines only. There may be specific conditions that apply to a particular income stream. For more information on income streams, visit your nearest service centre or call the Financial Information Service on 132 300.

What you need to tell us

You will need to provide us with an Income Stream Schedule, using the Details of income stream product form (SA330), or a similar schedule from the provider of your income stream. The form or a similar schedule must be completed by your product provider or the trustee of the Self Managed Superannuation Fund (SMSF) or Small APRA Fund (SAF) or the SMSF administrator.

If you buy or commence an income stream, you also have to tell us where you transferred the money from to buy or commence the income stream.

If you withdraw money from your income stream, other than your regular income payments, you also have to tell us:

  • how much money you withdrew, and
  • how you re-invested or disposed of the money you withdrew

Your product term expires

If your income stream term expires and all or part of your purchase price is returned to you, you will need to tell us

  • how much money was returned to you, and
  • how you re-invested or disposed of the money returned to you

We need this information to ensure that we record your income stream details correctly and you receive the correct entitlement.

Other government information

You can find more information about income streams on the:

Page last updated: 15 April 2016