4.9.6.50 Percentage Payment Splits - Defined Benefit Income Streams

Summary

This topic covers income test assessment.

Note: Currently, most defined benefit income streams are ATE under the provisions of SSAct sections 9A and 9B or the associated disallowable instruments issued by the Secretary of DSS. Queries regarding asset values for defined benefit income streams should be referred to the Financial Markets Helpdesk in DSS.

Income test assessment

Calculate assessable income from primary FLA (1.1.P.385) and secondary FLA (1.1.S.65) respectively as follows:

Step	Description
1	Obtain new gross income for member (1.1.M.118) (primary FLA) and non-member (1.1.N.115) (secondary FLA) respectively.
2	Obtain 'deductible amounts' for each FLA income stream from the income stream provider. The deductible amount for the original FLA is the deductible amount as defined in SSAct section 9(1). (The deductible amounts for the primary FLA and the secondary FLA are calculated by apportioning the deductible amount for the original FLA according to the percentages specified in the court order (or superannuation agreement)).
3	Calculate assessable income by reducing the gross income of both the primary FLA (member) and secondary FLA (non-member) by the deductible amount (1.1.D.44) calculated for each income stream. Assessable income = Gross income − Deductible amount

Step

Description

Obtain new gross income for member (1.1.M.118) (primary FLA) and non-member (1.1.N.115) (secondary FLA) respectively.

Obtain 'deductible amounts' for each FLA income stream from the income stream provider. The deductible amount for the original FLA is the deductible amount as defined in SSAct section 9(1).

(The deductible amounts for the primary FLA and the secondary FLA are calculated by apportioning the deductible amount for the original FLA according to the percentages specified in the court order (or superannuation agreement)).

Calculate assessable income by reducing the gross income of both the primary FLA (member) and secondary FLA (non-member) by the deductible amount (1.1.D.44) calculated for each income stream.

Assessable income = Gross income − Deductible amount

Example: Henry receives a pension from his defined benefit income stream. At the operative time (1 January 2003), his annual pension payment is $20,000.

Court orders a 'percentage payment split', with 60% of payments going to Henry and 40% payment going to Wilma.

Step	Description
1	Henry's new annual gross income as advised by the provider is $12,000. Wilma's annual income is $8,000.
2	Obtain 'deductible amounts' (1.1.D.44) for each income stream from the provider. For the purpose of this exercise, Henry's new deductible amount is $4,500 p.a. while Wilma's deductible amount is $3,000 p.a.
3	Calculate assessable income by reducing the gross income of both the primary FLA (member) and secondary FLA (non-member) by the deductible amount (1.1.D.44) calculated for each income stream. M assessable income (Henry): $12,000 − $4,500 = $7,500 NM assessable income (Wilma): $8,000 − $3,000 = $5,000 As per above calculation, Henry's assessable income is $7,500 p.a. while Wilma's assessable income is $5,000 p.a.

Step

Description

Henry's new annual gross income as advised by the provider is $12,000. Wilma's annual income is $8,000.

Obtain 'deductible amounts' (1.1.D.44) for each income stream from the provider.

For the purpose of this exercise, Henry's new deductible amount is $4,500 p.a. while Wilma's deductible amount is $3,000 p.a.

Calculate assessable income by reducing the gross income of both the primary FLA (member) and secondary FLA (non-member) by the deductible amount (1.1.D.44) calculated for each income stream.

M assessable income (Henry): $12,000 − $4,500 = $7,500

NM assessable income (Wilma): $8,000 − $3,000 = $5,000

As per above calculation, Henry's assessable income is $7,500 p.a. while Wilma's assessable income is $5,000 p.a.