4.9.2.60 Sections 9A (Lifetime) & 9B (Life Expectancy) of the SSAct Applying Prior to 20/09/2004

Summary

This topic contains the legislation that applied to ATE income streams purchased before 20 September 2004. It is contained here as historical reference. This topic covers:

section 9A (lifetime income streams) of the SSAct applying prior to 20 September 2004, and
section 9B (life expectancy income streams) of the SSAct applying prior to 20 September 2004.

Note: The term 'spouse' was removed from sections 9A and 9B of the SSAct and replaced with 'partner' as a result of the same-sex amendments. This was in line with the Government's commitment to remove potentially discriminatory terms from legislation and policy.

Section 9A (lifetime income streams) of the SSAct applying prior to 20/09/2004

Meaning of asset-test exempt income stream-lifetime income streams

General requirements

9A(1) An income stream provided to a person is an asset-test exempt income stream for the purposes of this Act if:

(a) it is an income stream arising under a contract, or governing rules, that meet the requirements of subsection (2) and the Secretary has not made a determination under subsection (4) in respect of the income stream; and

(b) subject to subsections (1B) and (1C), the Secretary is satisfied that in relation to an income stream, provided by a class of provider specified by the Secretary for the purposes of this paragraph, there is in force a current actuarial certificate that states 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 contract or governing rules; and

(c) the Secretary is satisfied that the requirements of subsection (2) are being given effect to from the day the income stream commences to be paid.

Determination under subsection (5)

9A(1A) An income stream provided to a person is an asset-test exempt income stream for the purposes of this Act if the Secretary has made a determination under subsection (5) in respect of the income stream.

Guidelines relating to actuarial certificates

9A(1B) The Secretary may determine, in writing, guidelines to be complied with when determining whether an actuarial certificate is in force and what constitutes a high probability that the provider of the income stream will be able to pay the income stream as required under the contract or governing rules.

9A(1C) Paragraph (1)(b) does not apply if, for a period beginning when an actuarial certificate referred to in that paragraph ceases to be in force and ending not more than 26 weeks later, such an actuarial certificate is not in force.

Requirements of contract/governing rules for provision of income stream

9A(2) A contract, or the governing rules, for the provision of an income stream to a person meet the requirements of this subsection if the contract or governing rules specify:

(a) that payments under the income stream are to be made at least annually throughout the life of the person and, if there is a reversionary beneficiary:
(i) throughout the reversionary beneficiary's life; or

(ii) if the reversionary beneficiary is a child of the person or of a former reversionary beneficiary under the income stream-at least until he or she turns 16; or

(iii) if the child referred to in subparagraph (ii) is a full-time student who has turned 16-at least until the end of his or her full-time studies or until he or she turns 25, whichever occurs sooner; and

(b) the total amount of the payments that may be made under the income stream in the first year after the commencement day of the income stream (not taking commuted amounts into account); and

(c) that the total amount of the payments that may be made under the income stream in any other year (not taking commuted amounts into account) may not fall below the total amount of the payments made under the income stream in the immediately preceding year (the previous total), and may not exceed the previous total:
(i) if subparagraph (ii) does not apply-by more than 5% of the previous total; or

(ii) if the index number for the second last quarter before the day on which the first of those payments is to be made (recent index number) exceeds the index number for the same quarter in the immediately preceding year (base index number) by more than 4% of the base index number-by more than such percentage of the previous total as is worked out under the formula:

(d) if the income stream is purchased-that the first payment under the income stream relates to the period commencing on the day on which the income stream is purchased; and

(e) if the income stream is not purchased-that the first payment under the income stream relates to the period commencing on the day on which the income stream is acquired; and

(f) if the income stream is not a defined benefit income stream-that the amount paid as the purchase price for the income stream is wholly converted into income; and

(g) that the income stream has no residual capital value; and

(h) that the income stream cannot be commuted except:
(i) if the income stream is a non-commutation funded income stream and the commutation is made within 6 months after the commencement day of the income stream; or

(ii) if the commutation is made to the benefit of a reversionary beneficiary or of the person's estate, on the death of the person within 10 years after the commencement day of the income stream; or

(iii) if the payment resulting from the commutation is transferred directly to the purchase of another income stream arising under a contract, or governing rules, that meet the requirements of this subsection or subsection 9B(2); or

(iv) to the extent necessary to cover any superannuation contributions surcharge that the person is liable to pay in his or her capacity as purchaser of the income stream; or

(iva) to the extent necessary to give effect to an entitlement of the person's partner or former partner under a payment split under Part VIIIB of the Family Law Act 1975; or

(v) to the extent necessary to pay a hardship amount; and

(i) that the income stream cannot be transferred to a person except:

(i) on the death of the primary beneficiary, to a reversionary beneficiary; or

(ii) on the death of a reversionary beneficiary, to another reversionary beneficiary; and

(j) that neither the capital value of the income stream, nor the income from it, can be used as security for a borrowing; and

(k) that, if the income stream reverts, it must not have a reversionary component greater than the benefit that was payable immediately before the reversion; and

(l) that, if the income stream is commuted, the commuted amount must not be greater than the benefit that was payable immediately before the commutation.

9A(2A) A contract, or the governing rules, for the provision to a person of an income stream that meets all of the requirements of subsection (2), except the requirement of paragraph (2)(c), are taken to meet the requirements of subsection (2) if the contract or governing rules specify that any provision included in the contract or governing rules in accordance with paragraph (2)(c) does not apply in any year in which:

(a) the person ceases to receive income under an income stream jointly and begins to receive income under a single income stream; and

(b) the total amount received in the year under the single income stream is less than the total amount received by the person in the previous year but is not nil.

Matters not required of income stream

9A(3) For the purpose of determining whether an income stream meets the requirements of subsection (2), it is immaterial that:

(a) if the primary beneficiary dies within 10 years after the commencement day of the income stream, a surviving reversionary beneficiary may be paid an amount equal to the total of the payments that the primary beneficiary would (if he or she had not died) have received from the day of the death until the end of the period of 10 years; and

(b) if:
(i) the primary beneficiary dies within 10 years after the commencement day of the income stream; and

(ii) there is no surviving reversionary beneficiary;
an amount, not exceeding the difference between:

(iii) the sum of the amounts that would have been so payable to the primary beneficiary in the period of 10 years; and

(iv) the sum of the amounts paid to the primary beneficiary;
is payable to the primary beneficiary's estate, and

(c) if:
(i) the primary beneficiary dies within 10 years after the commencement day of the income stream; and

(ii) there is a surviving reversionary beneficiary who also dies within that period;

there is payable to the reversionary beneficiary's estate an amount determined as described in paragraph (b) as if that paragraph applied to the reversionary beneficiary.

Determination that income stream not asset-test exempt

9A(4) The Secretary may determine that an income stream that meets the requirements of subsection (2) is not an asset-test exempt income stream if the Secretary is satisfied that the person who has purchased the income stream has commuted an asset-test exempt income stream within 6 months after its commencement day on at least 3 occasions since the person first received a social security payment.

Determination that income stream is asset-test exempt

9A(5) The Secretary may determine, in writing, that an income stream that does not meet the requirements of subsection (2) is an asset-test exempt income stream for the purposes of this Act. In making the determination, the Secretary is to have regard to the guidelines determined under subsection (6).

Guidelines to be complied with in making determination

9A(6) The Secretary may determine, in writing, guidelines to be complied with when making a determination under subsection (5). The determination is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

9A(7) In this section:

hardship amount, in relation to a person, means an amount determined by the Secretary for the purposes of this definition if:

(a) the person applies in writing to the Secretary to be allowed to commute the whole or part of an income stream because of extreme financial hardship; and

(b) the Secretary is satisfied that:
(i) the person's circumstances are exceptional and could not be reasonably foreseen at the time the person purchased the income stream; and

(ii) the person has insufficient liquid assets or other assets (excluding the person's principal home) that could be realised to avoid the extreme financial hardship; and

(iii) that amount is required to meet unavoidable expenditure.

liquid assets, in relation to a person, means the person's cash and readily realisable assets, and includes:

(a) the person's shares and debentures in a public company within the meaning of the Corporations Law; and

(b) managed investments; and

(c) insurance policies that can be surrendered for money; and

(d) amounts deposited with, or lent to, a bank or other financial institution by the person (whether or not the amount can be withdrawn or repaid immediately); and

(e) amounts due, and able to be paid, to the person by, or on behalf of, a former employer of the person.

but does not include the sum of NDIS amounts (1.1.N.03) paid to the person and any return on those amounts that the person earns, derived or received, less the sum of amounts spent by the person in accordance with a NDIS plan (1.1.N.06) under which the amounts were paid.

non-commutation funded income stream means an income stream that has not been purchased by transferring directly to the purchase of the income stream a payment resulting from the commutation of another asset-test exempt income stream.

unavoidable expenditure, in relation to a person, means one or more of the following:

(a) essential medical expenses of the person, or the person's partner, to the extent that the expenses are not covered by health insurance or other contracts or arrangements;

(b) the cost of:
(i) replacing the person's principal home; or

(ii) essential repairs to the person's principal home;
to the extent that the cost of the replacement or repairs is not covered by an insurance policy;

(c) expenditure to buy replacement essential household goods because of the loss of those goods to the extent that the cost of replacement is not covered by an insurance policy.

Section 9B (life expectancy income streams) of the SSAct applying prior to 20/09/2004

Meaning of asset-test exempt income stream-life expectancy or 15 year minimum term income streams

General requirements

9B(1) An income stream provided to a person is also an asset-test exempt income stream for the purposes of this Act if:

(a) the person has reached pension age on or before the day on which the person purchases or acquires the income stream; and

(b) either subsection (1A) or (1B) applies.

9B(1A) This subsection applies if:

(a) the income stream is an income stream arising under a contract, or governing rules, that meet the requirements of subsection (2) and the Secretary has not made a determination under subsection (3) in respect of the income stream; and

(b) subject to subsection (1C), the Secretary is satisfied that, in relation to an income stream provided by a class of provider specified by the Secretary for the purposes of this paragraph, there is in force a current actuarial certificate that states 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 contract or governing rules; and

(c) the Secretary is satisfied that the requirements of subsection (2) have been given effect to from the day the income stream commenced to be paid.

9B(1B) This subsection applies if the Secretary has made a determination under subsection (4) in respect of the income stream.

9B(1C) Paragraph (1A)(b) does not apply if, for a period beginning when an actuarial certificate referred to in that paragraph ceases to be in force and ending not more than 26 weeks later, such an actuarial certificate is not in force.

9B(1D) The Secretary may determine, in writing, guidelines to be complied with when determining whether an actuarial certificate is in force and what constitutes a high probability that the provider of the income stream will be able to pay the income stream as required under the contract or governing rules.

Requirements of contract/governing rules for provision of income stream

9B(2) A contract, or the governing rules, for the provision of an income stream to a person meets the requirements of this subsection if the contract or governing rules specify:

(a) that the payments under the income stream are to be made at least annually:
(i) if the person's life expectancy is less than 15 years-throughout a period that is equal to the person's life expectancy or, if the person's life expectancy does not consist of a number of whole years, throughout any period not less than the person's life expectancy and not greater than the person's life expectancy, rounded up, in either case, to the next whole number of years; or

(ii) if the person's life expectancy is 15 years or more-throughout a period that is not less than 15 years but not more than the person's life expectancy (rounded up at the person's option, if it does not consist of a whole number of years, to the next whole number); and

(b) the total amount of the payments that may be made under the income stream in the first year after the commencement day of the income stream (not taking commuted amounts into account); and

(c) that the total amount of the payments that may be made under the income stream in any other year (not taking commuted amounts into account) may not fall below the total amount of the payments made under the income stream in the immediately preceding year (the previous total), and may not exceed the previous total:
(i) if subparagraph (ii) does not apply-by more than 5% of the previous total; or

(ii) if the index number for the second last quarter before the day on which the first of those payments is to be made (recent index number) exceeds the index number for the same quarter in the immediately preceding year (base index number) by more than 4% of the base index number-by more than such percentage of the previous total as is worked out under the formula:

(d) if the income stream is purchased-that the first payment under the income stream relates to the period commencing on the day on which the income stream is purchased; and

(e) if the income stream is not purchased-that the first payment under the income stream relates to the period commencing on the day on which the income stream is acquired; and

(f) if the income stream is not a defined benefit income stream-that the amount paid as the purchase price for the income stream is wholly converted into income; and

(g) that the income stream has no residual capital value; and

(h) that the income stream cannot be commuted except:
(i) if the income stream is a non-commutation funded income stream and the commutation is made within 6 months after the commencement day of the income stream; or

(ii) if the payment resulting from the commutation is transferred directly to the purchase of another income stream provided under a contract, or governing rules, that meet the requirements of this subsection or subsection 9A(2); or

(iii) if the legal or equitable interest in the payment resulting from the commutation is transferred:
(A) on the death of a person, to the benefit of a reversionary beneficiary or, if there is no reversionary beneficiary, to the person's estate; or

(B) on the death of a reversionary beneficiary (the deceased reversionary beneficiary), to the benefit of another reversionary beneficiary or, if there is no other reversionary beneficiary, to the estate of the deceased reversionary beneficiary; or

(iv) to the extent necessary to cover any superannuation contributions surcharge that the person is liable to pay in his or her capacity as purchaser of the income stream; or

(iva) to the extent necessary to give effect to an entitlement of the person's partner or former partner under a payment split under Part VIIIB of the Family Law Act 1975; or

(v) to the extent necessary to pay a hardship amount; and

(i) that the income stream cannot be transferred to a person except:
(i) on the death of the primary beneficiary, to a reversionary beneficiary or, if there is no reversionary beneficiary, to the estate of the primary beneficiary; or

(ii) on the death of a reversionary beneficiary, to another reversionary beneficiary or, if there is no other reversionary beneficiary, to the estate of the reversionary beneficiary; and

(j) that neither the capital value of the income stream, nor the income from it, can be used as security for a borrowing; and

(k) that, if the income stream reverts, it must not have a reversionary component greater than the benefit that was payable immediately before the reversion; and

(l) that, if the income stream is commuted, the commuted amount must not be greater than the benefit that was payable immediately before the commutation.

9B(2A) A contract, or the governing rules, for the provision to a person of an income stream that meets all of the requirements of subsection (2), except the requirement of paragraph (2)(c), are taken to meet the requirements of subsection (2) if the contract or governing rules specify that any provision included in the contract or governing rules in accordance with paragraph (2)(c) does not apply in any year in which:

(a) the person ceases to receive income under an income stream jointly and begins to receive income under a single income stream; and

(b) the total amount received in the year under the single income stream is less than the total amount received by the person in the previous year but is not nil.

Determination that income stream not asset-test exempt

9B(3) The Secretary may determine that an income stream that meets the requirements of subsection (2) is not an asset-test exempt income stream if the Secretary is satisfied that the person who has purchased the income stream has commuted an asset-test exempt income stream within 6 months after its commencement day on at least 3 occasions since the person first received a social security payment.

Determination that income stream is asset-test exempt

9B(4) The Secretary may determine, in writing, that an income stream that does not meet the requirements of subsection (2) is an asset-test exempt income stream for the purposes of this Act. In making the determination, the Secretary is to have regard to the guidelines determined under subsection (5).

Guidelines to be complied with in making determination

9B(5) The Secretary may determine, in writing, guidelines to be complied with when making a determination under subsection (4). The determination is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

9B(6) In this section:

hardship amount has the same meaning as in section 9A.

non-commutation funded income stream means an income stream that has not been purchased by transferring directly to the purchase of the income stream a payment resulting from the commutation of another asset-test exempt income stream.