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Social security treatment of retirement income streams

Section: 9.3

Prior to 1 July 2019, retirement income streams were classified into three categories based on their product features for social security means test purposes.

These categories applied regardless of whether they were purchased with superannuation or non-superannuation moneys:

  • asset tested (long-term) - generally have a term greater than five years or an account based income stream
  • asset tested (short-term) - term of five years or less
  • asset test exempt - generally purchased pre 20 September 2007, commutable in very limited circumstances and nil residual capital value.

From 1 July 2019, a fourth category of income stream called 'lifetime income streams' was added. Lifetime income streams must be purchased on or after 1 July 2019, and once payments commence they must continue for the remainder of the primary or reversionary beneficiary's lifetime.

Category Social security assessment Product types
Lifetime income stream - purchased on or after 1 July 2019 Assessable assets84:
  • 60% of purchase price assessable until age 84 (or minimum five years), then
  • 30% of purchase price assessable for remainder of life

Assessable income:

  • 60% of annual payment
  • Immediate lifetime annuities
  • Deferred lifetime annuities
  • Group self annuitized products
  • Lifetime pensions
Asset test exempt Assessable assets:
  • Purchased prior to 20 Sept 2004 or defined benefit income stream: 100% asset test exempt
  • Purchased on or after 20 Sept 2004 and prior to 20 Sept 2007: 50% asset test exempt

Non-account based:

50% x (purchase price - (purchase price x (term elapsed/relevant number)))

Account based:

50% x account balance Assessable income:

  • Annual payment - (purchase price/relevant number)
  • Defined benefit:

Annual payment - deductible amount

  • Lifetime pensions and annuities purchased prior to 20 September 2007.
  • Life expectancy pensions and annuities purchased prior to 20 September 2007.
  • Term allocated pensions purchased prior to 20 September 2007.
  • Defined benefit pensions that are commenced at any time (20 September 2007 date does not apply).
  • Income streams the Secretary has determined in writing meet the requirements.
Asset tested (long-term) Assessable assets:
  • Account based: 100% account balance assessable
  • Not account based:

Purchase price - [((purchase price - residual capital value)/relevant number) x term elapsed]

Assessable income:

  • Account based and purchased on or after 1 January 2015: deemed
  • Account based, purchased before 1 January 2015 and member continuously in receipt of an income support payment since 1 January 2015:

Annual payment - ((purchase price - commutations - residual capital value)/relevant number)

  • Non-account based:

Annual payment - ((purchase price - commutations - residual capital value)/relevant number)

  • Account based income streams
  • Allocated pensions and annuities
  • Immediate lifetime annuities purchased before 1 July 2019
  • Fixed term annuities with a term of six years or greater85
Asset tested (short-term) All income streams which are not classified as assets test exempt or asset tested (long-term). These income streams generally have fixed terms of five years or less. Short-term annuities and pensions, with or without an RCV, with a fixed term of five years or less.

Last modified: Wednesday, July 24, 2019