Draft regulations released for innovative income streams

Tuesday 21 March 2017

The Government has released an exposure draft of regulations to introduce new design rules for lifetime superannuation income stream products that will enable retirees to managed consumption and longevity risk.

The draft regulations introduce a new income stream standard into the superannuation legislation. Income streams that meet these standards will be considered pensions for superannuation law purposes and superannuation income streams for tax purposes. Consequently, income from assets held to support these income streams will be exempt from tax, and pension payments will attract concessional tax treatment.

Broadly, for an income stream to meet the new standard it will need to satisfy four key elements:

  • benefit payments must not commence until a primary beneficiary has retired, has a terminal medical condition, is permanently incapacitated or has attained the age of 65
  • benefit payments must be made at least annually throughout a beneficiary’s lifetime following the cessation of any payment deferral period
  • after benefit payments start, there is no unreasonable deferral of payments from the income stream
  • restrict amounts that can be commuted to a lump sum or rolled over based on a declining capital access schedule commencing from the retirement phase

Small superannuation funds will not be able to provide these new pensions to members, unless the pension is backed by an insurance policy.

The draft regulations are proposed to commence from 1 July 2017. Comments on the exposure draft are due by 12 April 2017.

Further information

Treasury, Treasury Laws Amendment (Innovative Superannuation Income Streams) Regulation 2017, 21 March 2017

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