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  • Transfer balance account reporting (TBAR) updates

    Regulations relating to the transfer balance cap (TBC) took effect from 5 April 2022. This means you can now commute excess transfer balance amounts from specific income streams, such as some legacy pensions and market linked pensions.

    You will be impacted if you have members who held a capped defined benefit income stream (CDBIS). That is a:

    • lifetime pension that commenced before and after 1 July 2017, or
    • life expectancy pension or annuity, or market linked pension, including those paid by retirement savings accounts (RSAs), or annuity that commenced prior to 1 July 2017,

    and were later commuted to purchase a life expectancy pension or annuity, or market linked pension or annuity.

    To ensure the transfer balance debits and credits are accurate, where these pensions have been commuted and an applicable new pension started:

    • on or before 4 April 2022 - you should report 5 April 2022 as the reported effective date, even though the events occurred prior to this date
    • on or after 5 April 2022 - you should report the date the events occurred as the reported effective date.

    When reporting the valuation, you should use the reported value from the actual date the event occurred, not the reported effective date.

    If you're impacted by this change you may need to seek professional advice and it may take time to get your records in order to commence reporting.

    To support you with this, we won't consider late lodgement penalties where:

    • You're required to report a transfer balance event that relates to this issue only
    • The lodgement due date for the event is prior to 1 January 2023.
    • You lodge the TBAR by 1 January 2023.

    You should commence reporting as soon as possible, as some members will begin to accrue an excess transfer balance tax liability from the date of the change to the regulations.

    The Commissioner has no discretion to remit excess transfer balance tax accrued by the individual.

    You should also review your current trust deed and pension agreements to ensure they allow this type of commutation.

    Due to these changes, we recommend you advise your members:

    • The amount of excess transfer balance tax is calculated and accrues from the reported effective date of the transfer balance debits and credits.
    • If they receive an excess transfer balance determination, and they choose to use the new exception to the commutation rules, then they must wait for us to issue a commutation authority to their fund.
      • Funds are only legally permitted to use the new exception to the commutation rules once a commutation authority is received from us.
      • If they want to commute from an income stream account that is not a CDBIS they don't need to wait for that fund to receive a commutation authority from us.
    • If their income stream currently qualifies for asset-test exempt status for Veteran and Social Security benefits:

    We will be updating our website to reflect these changes in the coming weeks.

    See also

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      Last modified: 27 May 2022QC 69699