1.1.D.45 Deduction amount

Definition

For ATE income streams and asset-tested income streams (long term), the deduction amount reduces the amount of income assessed under the social security income test. It reflects the return of capital over the term of the product.

The deduction amount is the purchase price (1.1.P.500) of the income stream (less RCV) divided by the term of the product for term products (including life expectancy products), or by life expectancy for allocated and lifetime products.

Note: For defined benefit income streams, assessable income under the income test is calculated using the deductible amount, NOT the deduction amount.

Note: Only lifetime income streams purchased or acquired before 1 July 2019 are assessed as asset-tested income streams (long term) and have the deduction amount method applied when determining the amount of assessable income from the income stream. Lifetime income streams purchased or acquired on or after 1 July 2019 are assessed as asset-tested income streams (lifetime), and have a different means test treatment.

Act reference: SSAct section 9(1)-'defined benefit income stream', section 9(1)-'deductible amount', section 9(1)-'purchase price', section 1099 Income-income stream not a defined benefit income stream, section 1099C Income-income stream not a defined benefit income stream

Policy reference: SS Guide 1.1.R.230 Residual capital value (RCV), 1.1.P.500 Purchase price, 4.9.3.10 General provisions for asset-tested income streams

Last reviewed: 1 July 2019