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  • CRT Alert 031/2020

    Changes to Transfer Balance Account calculation

    The Treasury Laws Amendment (2019 Measures No 3) Bill recently passed through the Senate and is waiting Royal Assent. It provides a new way of calculating the debit which arises in an individual’s transfer balance account when a member commutes a market linked pension which is a capped defined benefit income stream.

    These changes address the current issue where an individual who commutes a market linked pension which is a capped defined benefit income stream is entitled to a debit valued at ‘nil” and are retrospective to 1 July 2017.

    Under the new approach, where one of these market linked pensions is commuted in full, the value of the debit will be calculated as the amount of the original transfer balance cap credit in respect of the income stream less the sum of the following amounts:

    • the amount of any transfer balance debits (other than a debit arising from a family law income split) in respect of the income stream
    • the total amount of superannuation income stream benefits the person was entitled to receive before the start of the financial year in which the commutation took place, and
    • the greater of:
      • the sum of the superannuation income stream benefits paid during the financial year in which the commutation takes place, or
      • the minimum amount required to be paid under regulations 1.07B and 1.07C of the Superannuation Industry (Supervision) Regulations 1994 or regulation 1.08 of the Retirement Savings Account Regulations 1997 during the financial year in which the commutation takes place. 

    As a result of these changes the ATO is reviewing its compliance approach where we had previously advised funds that we would not, at that time, take compliance action if a fund did not report the required transfer balance account events of the commutation and re-start a market linked pension, or reported a commutation amount other than nil to us.

    Funds will need to review the information already reported to us and consider whether they need to amend any reporting in line with the legislation.

    Acknowledging the focus that funds, agents and other tax professionals have at this time in responding to the Government’s stimulus measures and tax time, we do not intend to engage with funds on how this legislation impacts their reporting obligations until August 2020. We will not take compliance action against funds who do not review their reporting before this time.

    Funds which identify that they will have a need to amend their reporting should not do so before engaging with us so we can work with them to manage the re-reporting.

    However, we will be contacting funds where these income streams will be commuted as part of a successor fund transfer (SFT) between now and August, to work through how to practically manage the impacts and ensure the debit, and new credit, can be correctly calculated and reported as part of the SFT.

      Last modified: 19 Jun 2020QC 62940