The Federal Government has moved to ensure that it closes off estate planning options within its changes to post-retirement income stream products.
The Government has opened the consultation period around the draft legislation intended to interim the new post-retirement income stream regime, but has made clear its intention to remove all scope for estate planning within the new rules.
Sitting at the heart of the Government’s move to eliminate scope for estate planning, is a rule which ensures there is no unreasonable deferral of benefit payments after the start of payments from the income stream.
The explanatory memorandum underpinning the draft legislation said this rule was “designed to ensure that a genuine retirement income stream is provided to a beneficiary, with benefit payments being set in a manner that does not circumvent the commutation rules or provide estate planning benefits”.
Opening the consultation period on the new legislation last week, the Minister for Revenue and Financial Services, Kelly O’Dwyer said the regulations are intended to cover a range of innovative income stream products including deferred products, investment-linked pensions and annuities and group self-annuitised products.
She noted that superannuation funds and life insurance companies would receive a tax exemption on income from assets supporting the new income stream products provided they were currently payable or, in the case of deferred products, held for an individual who had reached retirement.
“These new rules will remove taxation barriers to the development of new products that will provide greater flexibility in the design of income stream products to give more choice to consumers, while ensuring income is provided throughout retirement,” O’Dwyer said.
“The development of these new products is a precursor to the development of comprehensive income stream products for retirement, or CIPRs,” she said.
The consultation period will close on 12 April.