Life insurers introducing new retirement income stream products will receive a tax exemption on income from supporting assets.

New draft regulations released by Treasury cover products such as deferred annuities that are payable or held for an individual who has reached retirement.

The income stream payments will be treated as super benefits for tax purposes.

“The new standards are intended to cover a range of lifetime products that do not meet the existing annuity and pension standards,” the draft regulation notes say.

“Under the new standards the income streams would be required to be payable for a beneficiary’s remaining lifetime.”

The regulations state the payments could be guaranteed by the provider through returns on a collective pool of assets or the mortality experience of asset pool beneficiaries.

Products may also have a deferral period for annual payments and could be cancelled subject to a declining capital access schedule and preservation rules.

An annuity must meet certain conditions, including payments commencing only after retirement, a terminal medical condition or the customer reaching the age of 65.

Payments must be at least annual, there is no deferral after an agreed start date for payments, and there are restrictions on how much can be paid as a lump sum.

Treasury says there are transition arrangements for a benefit paid from a contract established after July 1 this year.

Revenue and Financial Services Minister Kelly O’Dwyer says the rules will remove tax barriers to the development new annuity products.

“These new rules will provide greater flexibility in the design of income stream products to give more choice to consumers, while ensuring income is provided throughout retirement,” she said. “The development of these new products is a precursor to the development of comprehensive income stream products for retirement.”

Submissions on the draft regulations close on April 12. They can be sent to superannuation@treasury.gov.au.