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Income Streams

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What is an income stream?

An income stream is an investment product which allows you to receive regular payments that are made up of income and a return of the capital you used to buy or acquire the product. You generally receive the payment from the product as a pension or as an annuity. Income streams may be purchased using savings or lump sum superannuation entitlements.

Please note: As of July 1 2009, changes to the definition of income mean that your assessable income for Centrelink and the Family Assistance Office will also include:

  • reportable superannuation contributions, and
  • total net losses from rental property or investment income.

You may need to provide additional information about your income to Centrelink or the Family Assistance Office.

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How does an income stream affect my payment?

Income streams are classified into 3 main categories based on their characteristics:

Asset Test Exempt income streams

Asset Test Exempt income streams that have all the required characteristics.

Asset Test

  • 100% asset test exempt if purchased prior to 20 September 2004.
  • 50% asset test exempt if purchased on or after 20 September 2004 and before 20 September 2007.
    Note: There is a formula for working out the asset value.

Income Test

  • For non-defined benefit income streams, the assessable income is calculated by reducing the gross annual payments by an amount (deduction amount) that reflects a return of the purchase price.
  • For defined benefit income streams, the assessable income is calculated by reducing the gross payment by an amount that could be claimed as a tax deduction (deductible amount).

    Note: As a result of the Better Super changes implemented on 1 July 2007, the value of the deductible amount is based on the 'Tax Free Component'. Superannuation funds are responsible for calculating the tax free component from 1 July 2007.

Asset Tested income streams (long term)

Asset Tested income streams (long term) that do not have all the required characteristics. The term is either more than 5 years or if less than 5 years then the term is equal to or greater than the owner's life expectancy.

Asset Test

  • Fully asset tested.
  • Where the income stream payments are backed by an account balance, for example, allocated and market-linked income streams, the asset is the account balance.
  • In any other case, the asset is based on the purchase price less commutations of the income stream reduced every 6 (or 12) months by the amount of the capital returned to that time.

Income Test

  • The assessable income is calculated by reducing the gross annual payments by an amount (deduction amount) that reflects a return of the purchase price.

Asset tested income streams (short term)

Asset tested income streams (short term) that do not have all the required characteristics and where the term is less than 5 years and is not equal to or greater than the owner's life expectancy.

Asset Test

  • Fully asset tested.
  • The asset is based on the purchase price less commutations of the income stream reduced every 6 (or 12) months by the amount of the capital returned to that time.

Income Test

  • They are treated as financial investments with deeming applied to the asset value to determine assessable income.

Note: These are only general guidelines. There may be specific conditions that apply to a particular income stream investment.

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More information

For more information on income streams:


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