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This topic ONLY covers the method of assessment of relevant numbers for ALLOCATED income streams. This includes:
Where no reversionary beneficiary is specified then the relevant number is based on the life expectancy of the primary beneficiary at the commencement day, refer to 4.9.3.30.
Where a reversionary beneficiary is specified then the following 2 parts explain how to determine the relevant number.
Note: These guidelines for determination of relevant numbers apply to allocated income streams that are paid as pensions. They also apply in respect of allocated income streams that are paid as annuities, except that the relevant provisions are specified in a contract rather than in the governing rules of a superannuation fund.
Where a trust deed of an allocated income stream provides the trustee with a genuine 'absolute discretion' then the relevant number is the 'life expectancy of the primary beneficiary'. Absolute discretion is where a trustee can decide:
A trustee has absolute discretion, if the reversionary beneficiary CANNOT be paid UNTIL the trustee exercises the discretion.
In the situation where the trustee has absolute discretion, the relevant number is the life expectancy of the primary beneficiary even when a reversionary beneficiary is specified.
When the primary beneficiary dies and the trustee exercises an absolute discretion to pay a new income stream to a beneficiary, the new relevant number is based on the life expectancy of the new beneficiary at the date the trustee exercises their absolute discretion. In these circumstances, the INCOME STREAM will have a new purchase price that is the remaining account balance at the time the discretion is exercised, and a new commencement day (the changeover date), relevant number and annual payment.
The following table shows how to determine the relevant number where there is specific direction to the trustee regarding the reversionary beneficiary and the way in which the benefit is to be paid.
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If a reversionary beneficiary is specified AND the benefit is to be paid… |
Then the relevant number is… |
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as a LUMP SUM, |
the primary beneficiary's life expectancy. |
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either in full or part, as an INCOME STREAM, |
the greater of the primary and reversionary beneficiaries' life expectancy. |
Note: Where the directions are that the income stream is to revert to the reversionary beneficiary, the income stream retains the purchase price and commencement day of the original income stream.
Where a trustee has NO specific direction as to HOW the benefit should be paid (income stream or lump sum), then the relevant number is the primary beneficiary's life expectancy.
When the primary beneficiary dies and the trustee exercises a limited discretion to pay a benefit as an INCOME STREAM to a new beneficiary, then the relevant number is the new beneficiary's life expectancy at the time the new income stream commences. This is also the case where the benefit is specified originally to be paid as a LUMP SUM, however the trustee exercises a limited discretion to pay the benefit as an INCOME STREAM. In these circumstances, the INCOME STREAM will have a new commencement day (the changeover date), relevant number and annual payment.
The reversionary beneficiary may be a dependant who is not the income support recipient's partner.
Example: A person under 16 years of age or a student under 25 years of age, or a relative with a disability.
In these cases, the greater of the income support recipient's life expectancy, or the specified period for which the income stream can be paid to the dependant under the terms of the trust deed, is taken into account in determining the relevant number to be used while the income support recipient is receiving the income stream payments. Depending on whether or not the trustee discretion is absolute (see above), the treatment will be the same as that applied to other beneficiaries (e.g. a partner).
If an income support recipient adds a reversionary beneficiary to the governing rules, or contract, covering an income stream after payment commences, the above provisions regarding trustee discretion need to be applied to calculate the relevant number. Where an income support recipient removes a reversionary beneficiary the above provisions need to be applied to determine the relevant number of the primary beneficiary and any remaining reversionary beneficiaries. It may be necessary for Centrelink to recalculate the deduction amount and assessable income. However, the purchase price and commencement date remain unchanged.
Example: Jack is a 65 year old single income support recipient. He purchases an allocated pension for $100,000 that pays an annual income of $8,000 per annum. His relevant number is 16.21. Therefore, his deduction amount is $6,169 per annum, which means that his assessable income from this source is $1,831 per annum.
He meets and marries Joan, who is also 65. On 1 March 2000 Jack nominates Joan as a reversionary beneficiary of his allocated pension. The trustee of the allocated pension does not have any discretion. Joan's average life expectancy was 19.88, on the date Jack's allocated pension commenced. Consequently, the deduction amount is reduced to $5,030 per annum from 1 March 2000 (i.e. $100,000/19.88). Jack's assessed income from this source is $2,970 per annum from 1 March 2000 (i.e. $8,000 - $5,030).
Act reference: SSAct section 9(1)-'relevant number'
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Last reviewed: 1 February 2010
