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4.9.6.50 Percentage payment splits - defined benefit income streams & military invalidity pension income streams

Summary

This topic covers income test assessment.

Note: Currently, most defined benefit income streams are ATE under the provisions of SSAct section 9A and section 9B or the associated disallowable instruments issued by the Secretary of DSS. All military invalidity pension income streams are ATE under SSAct section 9BB.

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' (1.1.D.44) or ‘special reduction amounts’ (1.1.S.250) 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) and the special reduction amount for the original FLA is the special reduction amount as defined in section 1099AAA(1).

(The deductible amounts or special reduction amounts for the primary FLA and the secondary FLA are calculated by apportioning the deductible amount or special reduction 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 or special reduction amount calculated for each income stream.
  • Assessable income = gross income − deductible amount OR special reduction 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' 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 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.

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