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Retirement phase income streams

Introduction to super income streams

Section: 16.1

Retirement phase income streams can take the form of pensions or annuities. For superannuation law purposes, there is generally little difference between a pension and an annuity as they are similar income streams but paid from different providers. Super funds generally provide pensions whereas annuities are paid under a contract with a life company or registered organisation.

Prior to the commencement of the superannuation reforms on 1 July 2017, all superannuation income streams qualified for a tax exemption on the earnings on assets supporting the income stream.

However as part of superannuation reform, a new concept has been introduced to make it clear that from 1 July 2017, not all superannuation income streams will be eligible for an earnings tax exemption.

From 1 July 2017, only 'retirement phase income streams' are eligible for an earnings tax exemption. In addition, only retirement phase income streams count towards the transfer balance cap.

Introduction to Super Income Streams

A super income stream refers to those income streams that may be commenced using accrued super benefits, whether during the lifetime of the fund member (subject to preservation requirements) or to one or more of their dependants following the member's death. A superannuation income stream cannot be paid to an estate.

A super income stream may be commenced within the same fund in which those benefits accrued, or it may be purchased with a super rollover benefit.

In order to receive concessional taxation, an income stream must meet the relevant SIS standards and be in the retirement phase (see 'Retirement phase income stream' above).

Note: This section is concerned only with the types and features of super pensions and annuities; it does not cover ordinary annuities.

Last modified: Thursday, August 24, 2017