9BMeaning of asset‑test exempt income stream—life expectancy income streams

9B Meaning of asset‑test exempt income stream—life expectancy income streams

(1) An income stream provided to a person is also an asset‑test exempt income stream for the purposes of this Act if: (a) the following criteria are satisfied: (i) the income stream’s commencement day happens before 20 September 2007; (ii) subsection (1A) applies; or (b) subsection (1B) applies. (1A) This subsection applies if: (aa) the person to whom the income stream is being provided is: (i) the primary beneficiary; or (ii) the primary beneficiary’s reversionary partner (if any) on the day of the primary beneficiary’s death; and (a) the income stream is an income stream arising under a contract, or governing rules, that meet the requirements of subsection (2) and the Secretary has not made a determination under subsection (3) in respect of the income stream; and (b) subject to subsections (1C), (1D) and (1E), the Secretary is satisfied that, in relation to an income stream provided by a class of provider specified by the Secretary for the purposes of this paragraph, there is in force a current actuarial certificate that states that the actuary is of the opinion that, for the financial year in which the certificate is given, there is a high probability that the provider of the income stream will be able to pay the income stream as required under the contract or governing rules; and (c) the Secretary is satisfied that the requirements of subsection (2) have been given effect to from the day the income stream commenced to be paid; and (d) in the case of an income stream acquired before 20 September 2004 that is provided to a primary beneficiary’s reversionary beneficiary—the remaining term (in years) of the income stream is equal to the life expectancy (in years) of the primary beneficiary’s reversionary beneficiary.

Note: For paragraph (b), financial year means a period of 12 months commencing on 1 July: see the Acts Interpretation Act 1901.

(1B) This subsection applies if the Secretary has made a determination under subsection (4) in respect of the income stream. Exception to paragraph (1A)(b) (1C) If, on 30 June in a financial year, an actuarial certificate referred to in paragraph (1A)(b) is in force in relation to an income stream, then paragraph (1A)(b) does not apply in relation to the next financial year (the later year) for the period: (a) beginning on 1 July of the later year; and (b) ending at the earlier of the following: (i) the start of the first day in the later year on which any actuarial certificate is given to the Secretary in relation to that income stream; (ii) the end of the period of 26 weeks beginning on 1 July of the later year. Guidelines relating to actuarial certificates (1D) The Secretary may determine, in writing, guidelines to be complied with when determining whether an actuarial certificate is in force and what constitutes a high probability that the provider of the income stream will be able to pay the income stream as required under the contract or governing rules. One certificate a financial year (1E) For the purposes of paragraph (1A)(b), if an actuarial certificate is given to the Secretary in a financial year in relation to an income stream, then any actuarial certificate given to the Secretary later in that financial year in relation to that income stream has no effect. Requirements of contract/governing rules for provision of income stream (2) A contract, or the governing rules, for the provision of an income stream to a person meets the requirements of this subsection if the contract or governing rules specify: (a) the income stream’s term, which must comply with subsection (2B), (2C) or (2E); and (aa) that payments under the income stream are to be made at least annually during the income stream’s term; and (b) the total amount of the payments that may be made under the income stream in the first year after the commencement day of the income stream (not taking commuted amounts into account); and (c) that the total amount of the payments that may be made under the income stream in any other year (not taking commuted amounts into account) may not fall below the total amount of the payments made under the income stream in the immediately preceding year (the previous total), and may not exceed the previous total: (i) if subparagraph (ii) does not apply—by more than 5% of the previous total; or (ii) if the index number for the second last quarter before the day on which the first of those payments is to be made (recent index number) exceeds the index number for the same quarter in the immediately preceding year (base index number) by more than 4% of the base index number—by more than such percentage of the previous total as is worked out under the formula: