4.9.6.55 Percentage Payment Splits - Market-Linked Income Streams

Summary

This topic covers:

  • market-linked income streams - asset test assessment,
  • market-linked income streams - subsequent reviews of primary and secondary FLA income stream asset values,
  • market-linked income streams - subsequent commutations made by member (asset test assessment),
  • market-linked income streams - income test assessment, and
  • market-linked income streams - subsequent commutations made by member (income test assessment).

Market-linked income streams - asset test assessment

Market-linked income streams purchased from 20 September 2004 to 19 September 2007 which satisfy the requirements of the SSAct section 9BA will receive a 50% asset test exemption.

Calculate assessable asset values for member (1.1.M.118) (primary FLA) and non-member (1.1.N.115) (secondary FLA) respectively as follows:

Step Description
1

Ascertain the percentages specified in the payment split (e.g. 60% − 40%).

The percentages indicate the proportions (MPROP, NMPROP) in which the member's original superannuation interest is apportioned respectively between the member and the non-member.

2

Calculate the asset values for both primary FLA (1.1.P.385) and secondary FLA (1.1.S.65) using the formula:

Asset value (primary FLA) = MPROP × Account balance of original FLA at the operative time × 50%

Asset value (secondary FLA) = NMPROP × Account balance of original FLA at the operative time × 50%.

Although there are 2 FLA income streams (1.1.F.50) (i.e. the primary FLA and secondary FLA), effectively there is only one account balance backing both FLA income streams. The asset value for each FLA income stream is the portion of the account balance at that time which backs the primary and/or secondary FLA multiplied by 50%.

Market-linked income streams - subsequent reviews of primary & secondary FLA income stream asset values

As with income streams that are not subject to a divorce property split, the asset values for the member's primary FLA (1.1.P.385) and the non-member's secondary FLA (1.1.S.65) will need to be reassessed at 6 or 12 month intervals depending on whether the income stream payments are received either:

  • once a year only (12 monthly intervals), or
  • 2 or more times annually (6 monthly intervals).

The first 6 (or 12) monthly interval for the new primary FLA and/or secondary FLA is dated from the previous review date for the original FLA (1.1.O.35), i.e. not the operative time (1.1.O.25) when the payment split occurred.

Note: For market-linked income streams, the asset value of both member and non-member should be halved (i.e. only 50% is exempt from the assets test).

Market-linked income streams - subsequent commutations made by member (asset test assessment)

The member may commute part of the original income stream after the operative time. The family law provisions require that such commuted amounts be apportioned between the primary FLA (1.1.P.385) and the secondary FLA (1.1.S.65) in the percentages resulting from the original 'percentage payment split'.

The asset value maintained for each FLA income stream (1.1.F.50) will be the portion of the remaining account balance that backs each FLA income stream immediately after the commutation multiplied by 50%.

Market-linked income streams - income test assessment

Calculate assessable income for member (1.1.M.118) (primary FLA) and non-member (1.1.N.115) (secondary FLA) respectively as follows:

Step Description
1

Calculate NPP (1.1.N.135) of original FLA (1.1.O.35) respectively at operative time (1.1.O.25) as follows:

NPP of original FLA at operative time

= NPP of original FLA at commencement day − any commutations prior to operative time.

2

Calculate the NPP for primary FLA (1.1.P.385) and secondary FLA (1.1.S.65) respectively at the operative time:

MNPP (primary FLA) = MPROP × NPP of original FLA at operative time

NMNPP (secondary FLA) = NMPROP × NPP of original FLA at operative time

Where:

  • MPROP is the proportion of the original FLA awarded to the member,
  • NMPROP is the proportion of the original FLA awarded to the non-member.
3

Calculate deduction amount for primary FLA and secondary FLA respectively as follows:

Member (deduction amount) = NPP of primary FLA at operative time/relevant number

Non-member (deduction amount) = NPP of secondary FLA at operative time/relevant number

Where relevant number is the relevant number of the original FLA at its commencement day (1.1.C.205).

4 Obtain gross income for primary FLA and secondary FLA respectively at the time of the assessment.
5 Reduce gross income from the primary FLA and secondary FLA respectively by the respective deduction amounts.

Market-linked income streams - subsequent commutations made by member (income test assessment)

The member may commute part of the original income stream after the operative time. The family law provisions require that such commuted amounts be apportioned between the primary FLA (1.1.P.385) and the secondary FLA (1.1.S.65) in the percentages specified in the original percentage payment split.

After the commutation is made, the new gross income amount must be obtained from the fund trustee for both the member (primary FLA) and non-member (secondary FLA). The NPP (1.1.N.135) for the member and the non-member must be reduced by his or her share of the commutation. This variation to NPP will mean that the deduction amount (and assessable income) for the member and the non-member will also have to be adjusted.

Last reviewed: 21 September 2015