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Capped defined benefit income streams

Capped defined benefit - Introduction

Section: 20.1

Capped defined benefit income streams are a special category of retirement phase income stream created from 1 July 2017 as part of superannuation reform. Capped defined benefit income streams have special valuation rules for transfer balance cap and total superannuation balance purposes as well as the taxation of pension/annuity payments.

Capped defined benefit income streams include:

Capped defined benefit income streams Must meet SIS regulation
Lifetime pensions commenced at any time 1.06(2)
Lifetime pensions prescribed in tax reg 294-130.01(2) or (3), and in existence at 29 June 2007 (or such a pension paid from a successor fund at a later date) 1.06(2) excluding the rules concerning: commutations and the variation or cessation of pension payments to the child of a deceased or reversionary beneficiary
Lifetime pensions prescribed in tax reg 294-130.01(4) that are provided on the grounds of invalidity under a public sector superannuation scheme 1.06(2) excluding certain rules concerning the variation, suspension or cessation of pension payments
Lifetime annuities commenced prior to 1 July 2017 1.05(2)
Life expectancy pensions and annuities commenced prior to 1 July 2017 1.06(7), 1.05(9)
Market-linked pensions and annuities commenced prior to 1 July 2017 1.06(8), 1.05(10)
Any income streams prescribed by the Regulations to be capped defined benefit income streams As set out in Regulations

From 1 July 2017, the only type of income stream that can be commenced that will meet the definition of capped defined benefit income stream is a non-commutable lifetime pension.9 Lifetime pensions are often provided to Commonwealth, State and Territory public office holders, and military and civilian employees. Most of these schemes are closed to new members.

Capped defined benefit income streams have modified rules for:

  • the transfer balance cap
  • total superannuation balance, and
  • the taxation of pension / annuity payments.

Last modified: Thursday, July 25, 2019