4.9.6.70 Payment splits of income streams: base amount payment splits

Summary

This topic covers:

• 'base amount payment split'
• types of base amount splits
• 'first splittable payment' (treatment of 'account-based'/'non-account-based' income streams)
• lump sums
• other base amount payment splits
• assessment of income stream between operative time and date of first splittable payment (or payout in full of non-member)
• data requirements, and
• additional data requirements at date of first splittable payment.

Note: Income streams purchased with eligible annuities, i.e. annuities that are treated as being purchased with rolled over superannuation monies, cannot be subject to base amount payment splits.

Base amount payment split

In the case of a base amount payment split (1.1.B.05), the entitlement of the non-member is specified in the superannuation agreement or court order (1.1.C.355) as a base amount, rather than as a percentage of future income stream payments. The member's superannuation interest, which may have other components than just an income stream, is then split to satisfy the non-member's entitlement to the base amount.

Much of the complexity surrounding base amount splits derives from the manner in which the first payment is made from the member's original superannuation interest after the operative time. This first splittable payment may be made from the income stream being assessed but it also may come from another part of the member's interest in the superannuation fund that is subject to a payment split.

Generally, superannuation fund trustees will seek to pay out the non-member's 'base amount' interest immediately after the operative time via the transfer, roll-over or commutation to a lump sum. However, in some cases, the payment of the base amount will be more complex. The following paragraphs and topics 4.9.6.80 to 4.9.6.100 outline the various ways in which payment of the base amount can occur.

Types of base amount splits

The non-member may receive his or her entitlement to a BASE AMOUNT in the following ways:

• the member commutes all, or part of, the entire income stream and pays the non-member out completely
• the first splittable payment is NOT made from the original FLA income stream but from another component of the superannuation interest (e.g. a lump sum) that is subject to the payment split. If the base amount is not paid out in full via the first splittable payment, the remaining portion of the base amount is paid by 'splitting' the reduced payments from the original FLA income stream in accordance with the provisions of the Family Law (Superannuation) Regulations 2001 (FL(S)R) Division 6.3. In this case, both the first and subsequent payments from the original FLA income stream are split in similar proportions. These split payments constitute the primary FLA (member) and secondary FLA (non-member)
• the base amount is paid to the non-member via the full amount of the first payment from the split income stream (i.e. the first splittable payment) PLUS a share of the subsequent payments made from the split income stream. The split of the remaining payments (primary and secondary FLAs) is determined in accordance with the provisions of the FL(S)R Division 6.3
• part of the first payment from the split income stream (i.e. the first splittable payment) is paid to fully satisfy the non-member's entitlement to the base amount. The non-member has no further entitlement to the member's interest
• the first payment from the split income stream (i.e. the first splittable payment) is paid in full to the non-member. The unsatisfied portion of the base amount is then paid out in full to the non-member via the creation of a new interest in the member's superannuation fund, or a transfer/roll-over to another superannuation fund, or a lump sum commutation
• the first payment from the split income stream (i.e. the first splittable payment) is paid in full to the non-member, plus a commutation of part of the remaining portion of the base amount. The non-member also receives the remaining portion of the base amount as a share of the remaining reduced payments made from the original split FLA income stream. The split of the remaining payments (primary and secondary FLA) is determined in accordance with the provisions of the FL(S)R Division 6.3
• where the base amount is to be satisfied from both an allocated income stream and a market-linked income stream, the base amount must first be satisfied from the allocated income stream. If the base amount exceeds the account balance backing the allocated income stream, the unsatisfied portion of the base amount is then satisfied from the market-linked income stream.

First splittable payment (treatment of account-based/non-account-based income streams)

Where the first splittable payment is made from an account-based income stream, the full base amount must be paid out, if possible, at the time of the first splittable payment.

Where the first payment from an account-based income stream is not the first splittable payment from the superannuation fund but is in satisfaction of the remaining portion of the base amount, the full amount must be paid from the account-based income stream.

If the income stream is not an account-based income stream then, if the first splittable payment after the operative time equals or exceeds the base amount, the non-member is entitled to be paid the base amount from that payment. The non-member will not be entitled to any further payments.

Lump sums

Any amounts paid to the member and non-member via the first splittable payment will be treated as exempt lump sums if retained by the member or non-member.

If either the member or non-member uses an amount commuted at any time following the payment split to purchase another income stream, the income stream will be treated as a new income stream for means test purposes. It will NOT be a FLA income stream.

Other base amount payment splits

Currently, the Financial Markets Helpdesk in DSS undertakes means test assessments for all income streams subject to a base amount payment split. Centrelink will forward the helpdesk all data necessary to perform the calculations. The data requirements are specified at the end of this topic.

The recipient, or income stream provider, must supply Centrelink with the data necessary to undertake the assessments. Details on the data requirements are outlined at the end of this topic.

Assessment of income stream between operative time & date of first splittable payment (or payout in full of non-member)

As indicated above, the non-member is not required to determine how she or he will receive the base amount until the date of the first splittable payment. Therefore, it may not be possible to identify the proportion in which the first splittable payment will be split between the member and the non-member prior to the date of the first splittable payment.

Note: For the above reason, no income will be assessed for the member and non-member for the period between the operative time and the date of the first splittable payment. However, where the member's original FLA is asset tested, then asset values will be maintained for each member and non-member (i.e. for the primary FLA and secondary FLA) during this period.

The asset test and income test assessment of income streams split according to a base amount payment split is explained in the following table:

Data requirements

The DSS helpdesk will require the following data to undertake means test assessments of income streams subject to a base amount payment split.

The data has been categorised according to data that may be held already by Centrelink and that which may need to be obtained from the recipient, or income stream provider.

If the non-member's interest is paid out in full between the operative time and the date of the first splittable payment, then assessments will be undertaken according to the guidelines specified in 4.9.6.20 and the data requirements specified in that section.

Additional data requirements at date of first splittable payment