Disclaimer: the information provided here is not intended as financial product advice or legal advice. It is offered on a best-effort basis only, and should be used only as starting point to consider the options available to SMSFs. Consult your financial adviser or a lawyer before acting on any information in this document. Always consult closely with Centrelink/DVA before altering asset-test exempt income streams. There are significant penalties for breaching the strict compliance conditions imposed on these income streams.

Can asset-test exemption of a life expectancy income stream be extended?

Yes, it is possible. But it isn't easy.

In some circumstances a 100% asset-test exempt life expectancy income stream can be commuted to a new asset-test exempt income stream. The new income stream can be a lifetime income stream or another life expectancy income stream.

The commutation must occur before the original income stream expires.

The Social Security Guide topic 4.9.2.17 lists a number of circumstances under which the commutation is permitted. Some of them are involuntary, others unpleasant. The one relevant to this discussion is this:

• the original income stream started before 20/09/2004; and,
• the whole SMSF must be wound-up because the trustees no longer wish to operate the fund; and,
• the balance of the life-expectancy account must be rolled-out to purchase an annuity from a suitable provider; and,
• the commutation is permitted only once.

Similar conditions apply to 50% asset-test exempt income streams. See Social Security Guide topic 4.9.2.17 for more details.