This Ruling explains when a ‘superannuation income stream’ (i.e., pension) commences and when it cease, and consequently when a superannuation income stream is payable.
These concepts are relevant to determine the income tax consequences for both the superannuation fund (including the availability of the pension exemption) and the member in relation to superannuation income stream benefits paid.
The Ruling primarily focuses on ‘account based pensions’ and ‘transition to retirement income streams’.
Ruling
There is an ‘income stream’ (within the definition of ‘superannuation income stream’), if a superannuation fund trustee has a liability to pay to a member “a series of periodic payments that relate to each other over an identifiable period of time”.
The payments need not be always paid at the same, recurring intervals, and may also vary in amount.
Also, a liability to make a single payment each year for a number of years can satisfy as a liability to pay a member a series of payments.
However, a liability to make a single payment for one year will not result in a series of payments and thus will not quality as an ‘income stream’.
When a superannuation income stream commences
All the capital which is to support a superannuation income stream must have been added to the relevant superannuation interest from which the superannuation income stream is to be paid (by way of contribution or rollover) before the income stream can commence.
Subject to this, a superannuation income stream commences on the first day of the period to which the first payment of the superannuation income stream relates (the ‘commencement day’).
When the commencement day occurs must be determined by reference to:
• the terms and conditions of the superannuation income stream agreed by the trustee and member;
• the rules of the superannuation income stream as set out in the governing rules of
the superannuation fund (e.g., the trust deed); and
• the relevant regulations of the SIS Regulations 1994.
The commencement day may occur before the due date of the first payment, depending on the rules which govern the superannuation income steam, but the commencement day cannot precede the date of the member’s request or application.
Further, the commencement day cannot occur prior to:
• the day established as the commencement day in the terms and conditions agreed between
the member and the trustee that will govern the superannuation income steam; or
• in circumstances where a member or dependant beneficiary becomes entitled to
the superannuation income stream under the governing rules of the superannuation fund,
the time at which the entitlement to start the income stream arises.
Once a superannuation income stream commences it is payable (that is, there is an obligation to pay superannuation income stream benefits from that superannuation income stream) until such time as that superannuation income stream ceases.
This remains true event if the member dies before any payment is due to be made under the terms of the arrangement.
