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  • Transfer balance cap – capped defined benefit income streams

    This information is for people who are:

    • retired and receiving one or more capped defined benefit income streams
    • retired and receiving both account-based and capped defined benefit income streams
    • expecting to receive a capped defined benefit income stream or annuity
    • receiving a capped defined benefit income stream and start receiving, or expect to receive, a reversionary defined benefit income stream
    • receiving, or may start receiving, a capped defined benefit income stream and are due to turn 60 years old soon.

    These income streams count towards your transfer balance cap. However the transfer balance cap rules apply differently to capped defined benefit income streams as generally, any excess transfer balance is unable to be commuted from these income streams.

    From 1 July 2017, your ‘defined benefit income cap’ limits the amount of tax-free income you can receive from a capped defined benefit income stream (pension or annuity) if you are:

    • 60 years old or older
    • under 60 years old and in receipt of a death benefit income stream from a person who died at 60 years old or over.

    For 2017–18, the defined benefit income cap is generally $100,000 (the $1.6 million general transfer balance cap divided by 16). However this is reduced in some circumstances, including if you turned 60 years old during the year or were over 60 years old and started receiving income from a capped defined benefit income stream for the first time partway through the year.

    If you exceed your transfer balance cap due to a combination of capped defined benefit income streams and account based income streams:

    • the tax consequences may apply to the income from your capped defined benefit income streams; and
    • you may need to commute your account based pension and be liable for excess transfer balance tax.

    Find out about:

    See also:

    • Transfer balance cap
    • LCR 2016/9 Superannuation reform: transfer balance cap
    • LCR 2016/10 Superannuation reform: defined benefit income streams – non-commutable, lifetime pensions and lifetime annuities
    • LCR 2017/1 Superannuation reform: defined benefit income streams – pensions or annuities paid from non-commutable, life expectancy or market-linked products.

    What are capped defined benefit income streams

    Capped defined benefit income streams include:

    • lifetime pensions, regardless of when they commence
    • lifetime annuities that existed prior to 1 July 2017
    • life expectancy pensions and annuities that existed prior to 1 July 2017
    • market-linked pensions and annuities that existed prior to 1 July 2017.

    If you are receiving an income stream, you should check with your superannuation fund to determine if it is a capped defined benefit income stream.

    If you have a capped defined benefit income stream your fund will calculate the 'special value' of your income stream and this value will count towards your transfer balance cap.

      Last modified: 18 Oct 2018QC 54353