4.1.8 Deprivation Related to Annuities

Summary

This topic discusses:

  • gifting of an annuity (1.1.P.425),
  • assessment of deprivation of an annuity under the assets test, and
  • assessment of deprivation of an annuity under the income test.

Gifiting of an annuity

Deprivation provisions apply to all payments subject to the means test.

For deprivation provisions to apply it MUST be shown that a recipient has destroyed or diminished the value of an asset (1.1.A.290), income, or a source of income.

Information on how to calculate the deprivation amount for an income support recipient is provided in the referenced topic.

Deprivation provisions apply where an income support recipient gifts (or disposes of) an annuity, AND does NOT receive adequate financial consideration (1.1.A.55).

Act reference: SSAct section 8(1)-'income'

Policy reference: SS Guide 4.1.1 General Provisions of Deprivation

Assessment of deprivation of an annuity under the assets test

The amount of disposition of an annuity is the value at the time of gifting of the annuity to a third party.

This will generally require an actuarial valuation.

Exception: If an actuarial valuation was done in the last 24 months, the value of the annuity is:

  • this valuation, MINUS
  • any income payments made since valuation.

Example: An income support recipient has an annuity valued less than 24 months ago at $100,000. They receive 12 $1,000 payments in a year. The income support recipient surrenders the annuity AFTER receiving the sixth payment for that year AND does NOT receive adequate financial consideration. The value of the disposed of asset (1.1.D.210) is $94,000 ($100,000 MINUS $6,000).

Assessment of deprivation of an annuity under the income test

Income deprivation provisions generally do NOT apply to disposal of annuities.

Explanation: Asset deprivation provisions apply.

Where an income support recipient forgoes an annuity payment, the value of the payment is assessed as being received. Therefore, income deprivation provisions apply to all forgone payments.

Act reference: SSAct section 1119 Value of asset-tested income streams that are not defined benefit income streams, section 1123 Disposal of assets

Policy reference: SS Guide 4.6.5.100 Assessing Private Annuities & Overseas Income Products

Last reviewed: 8 May 2017