• Example 1

    Sebastian, age 54, has a defined benefit interest in a taxed superannuation fund. Sebastian's interest is in the accumulation phase. Both Sebastian and his employer contribute to the superannuation fund. Sebastian will be able to take his retirement benefit on reaching age 60.

    On retirement, Sebastian will be entitled to be paid up to 50% of his benefits held in the fund as an indexed lifetime income stream and the remainder of the benefits as a lump sum. If Sebastian had been eligible to retire and had elected to do so at 30 June 2007, the annual rate of the maximum income stream payable would be $10,000 and his lump sum payable would be $100,000.

    Sebastian would have been entitled to be paid a lump sum benefit of $200,000 had he actually resigned on 30 June 2007.

    Sebastian's fund would determine the value of his interest for the purpose of calculating the pre-July 1983 amount of the crystallised segment of the tax-free component of his interest as follows:

    Step 1

    Calculate the value of the retirement benefit that would have been payable at 30 June 2007.

    As Sebastian would be entitled to take up to 50% of his retirement benefit as an income stream, multiply the annual rate of the maximum income stream by the applicable factor to determine the value of the income stream.

    The applicable factor for an indexed lifetime income stream payable to a person aged 60 is 16.513 (see Table 1 of Schedule 1B to the Income Tax Assessment Regulations 1997).

    $10,000 x 16.513 = $165,130

    The total value of the retirement benefit is the sum of the value of the income stream (worked out above) and the amount of the lump sum payable on retirement.

    $165,130 + $100,000 = $265,130

    Step 2

    Sebastian would have been entitled to a lump sum of $200,000 if he had actually resigned on 30 June 2007.

    Step 3

    The value of Sebastian's defined benefit superannuation interest for the purpose of calculating the pre-July 1983 amount at 30 June 2007 is the greater of the values worked out using steps 1 and 2.

    The value of Sebastian's defined benefit superannuation interest for the purpose of calculating the pre-July 1983 amount of the crystallised segment at 30 June 2007 is $265,130.

      Last modified: 25 May 2015QC 19618