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  • Excess transfer balance determination

    If you have an excess transfer balance we may issue you with an excess transfer balance determination.

    The purpose of the determination is to advise you of your excess transfer balance and crystallise the amount you need to commute from your retirement phase income stream in order to rectify your excess.

    Your determination will detail:

    • your excess transfer balance amount
    • the due date you need to commute the amount by
    • the excess period
    • your personal transfer balance cap.

    Your determination will also include a default commutation notice. This notice outlines which super fund and income stream account we will send a commutation authority to if you don't commute or make an election by the due date on your determination.

    Note: You may have income streams, such as a life time pension, which count towards your excess transfer balance cap but which are not included in the default commutation notice. These income streams are known as capped defined benefit income streams. We don't include these in the default commutation notice because they generally can't be commuted.

    Example 1

    On 1 July 2018, Bec commences a superannuation income stream of $1 million from the superannuation fund her employer contributed to (Master Superannuation Fund). On 1 October 2018, Bec also commences a $1 million superannuation income stream in her SMSF, Bec’s Super Fund.

    On 1 July 2018, Bec’s transfer balance account is $1 million. On 1 October 2018, Bec’s transfer balance account is credited with a further $1 million bringing her transfer balance account to $2 million. This means that Bec has exceeded her personal transfer balance cap of $1.6 million by $400,000.

    Bec's SMSF reports this to us on 28 January 2019.

    On 30 January 2019, the ATO issues an excess transfer balance determination to Bec setting out her excess transfer balance amount which will be made up of the $400,000.00 plus earnings that accrued from 1 October 2018 to when we made the determination).

    Included with the determination is a default commutation authority notice which lets Bec know that, if she doesn't commute the full amount voluntarily or make an election by the due date on the determination, the ATO will issue a commutation authority to Master Superannuation Fund requiring the trustee to commute the excess transfer balance amount from her superannuation income stream.

    Bec will not be entitled to have her personal transfer balance cap indexed as the highest ever balance in her transfer balance account was $1.6 million before 1 July 2021.

    End of example

    Excess transfer balance earnings

    The earnings on your excess transfer balance are 'excess transfer balance earnings'. They are notional earnings calculated using a formula in the law. A notional amount is used because it is difficult to determine actual earnings on a specific portion of the overall assets.

    Excess transfer balance earnings compound daily. Each day the earnings are calculated and credited to your transfer balance account. This increases the amount that excess transfer balance earnings are calculated on for the following day. This process continues until we issue an excess transfer balance determination, or you stop having an excess transfer balance, whichever is earlier.

    The daily rate for excess transfer balance earnings is worked out as follows:

    90-day bank accepted bill yield + seven percentage points ÷ number of days in the calendar year.

    This rate is based on the general interest charge.

    The 90-day bank accepted bill yield is a benchmark indicator published by the Reserve Bank of Australia.

    We will calculate your excess transfer balance earnings and advise you of the amount credited to your excess transfer balance account when we issue an excess transfer balance determination.

    Excess transfer balance earnings will continue to accrue until your transfer balance is equal to or less than your personal transfer balance cap and you will pay excess transfer balance tax on those earnings.

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      Last modified: 15 Apr 2021QC 54355