You are right in pointing out that I jumped a step in my example by referring to an income stream immediately after mentioning the $500,000. I simply jumped ahead by assuming that you would understand that moving the lump sum to pension stage would lead to an income stream being paid i.e. the lump sum is not the income stream but the movement of funds to pension stage leads to an income stream being payable. Hope I have correctly understood the point you were making.
The issue about the amount of funds in pension (and,possibly, accumulation) at the end of the financial year leads to all sorts of issues in relation to use of the segregation or non segregation (proportionate) method for distribution of income when you have a total super balance above or below $1.6m(you mentioned this figure in an earlier post) is the next area of complication!