Calculating defined benefit super interest value

When defined benefit super interest applies

This information applies only to superannuation interests that are:

• defined benefit interests in taxed funds
• in the accumulation phase.

What is a defined benefit interest?

A defined benefit interest is generally an interest for which the benefits payable from the interest are defined by reference to a specified amount or matter, commonly the member's salary at a particular time or an average salary for a particular period.

What is the pre-July 1983 amount?

The pre-July 1983 component relates to superannuation entitlements accrued before 1 July 1983. The pre-July 1983 amount forms part of the tax-free component of the interest.

When is the pre-July 1983 amount calculated?

Taxed super funds calculate the pre-July 1983 component of the crystallised segment for all interests that include a taxable component and are in the accumulation phase as at 30 June 2007.

Taxed super funds had until 30 June 2008 to calculate the pre-July 1983 components.

Determining defined benefit super interest

The pre-July 1983 amount for a defined benefit interest is calculated using the following 3 steps:

Step 1

1. Calculate the value of the retirement benefit that would have been payable at 30 June 2007 if the member had been eligible to retire on that date and had elected to do so.
2. If the retirement benefit depends on the member's age, service or salary, or on the employer's consent, assume that the:
   • member's service was their actual service to 30 June 2007
   • member's age was the greater of the minimum age at which a retirement benefit could be taken without the employer's consent and the member's actual age at 30 June 2007
   • member's salary was their salary for superannuation purposes as at 30 June 2007
   • employer has consented to the retirement.
3. If part or all of the retirement benefit can be paid as a superannuation income stream, it's necessary to work out 2 amounts:
   • first, the value of the income stream is calculated as
     • the annual rate of the income stream that would have been paid had the maximum proportion of the benefit possible been taken as an income stream
   • multiplied by
     • the applicable factor (for applicable factors see Clause 1, Schedule 1B of the Income Tax Assessment (1997 Act) Regulations 2021
   • then, the total value of the retirement benefit is calculated as
     • the value of any income stream as calculated above, plus
     • the amount of any lump sum payable under the above assumptions had the member taken the maximum possible proportion of their benefits as an income stream.
4. If the superannuation benefit can only be paid as a lump sum, then the value of the retirement benefit is the amount of that lump sum.

Step 2

If a superannuation lump sum benefit, including a rollover superannuation benefit, would have been payable had the member resigned, or withdrawn their benefit on 30 June 2007, calculate the amount of that benefit.

Step 3

The value of the defined benefit superannuation interest for the purpose of calculating the pre-July 1983 amount is either:

• the greater of the values worked out using Steps 1 and 2
• if no value can be determined under Step 2, the value of the defined benefit superannuation interest is the value worked out in Step 1.

Calculating crystallised segment example