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  • Total superannuation balance

    Your total superannuation balance at a particular time is calculated by:

    • adding together  
      • the accumulation phase value of your super interests that are not in the retirement phase – this is the total amount of benefits that would become payable if you voluntarily ceased the interest at that time
      • the retirement phase value of your super interests – this is the balance of your transfer balance account, modified to reflect the value of account-based interests in the retirement phase at that time and disregarding certain debits
      • the amount of each roll-over super benefit not already reflected in the accumulation phase value or the retirement phase value (that is, rollovers in transit between super funds on 30 June)
      • in certain circumstances, the outstanding balance belonging to a limited recourse borrowing arrangement (LRBA) in an SMSF (or other regulated super fund with less than 5 members) you entered into from 1 July 2018, if either
        • the LRBA is with an associate of the fund, or
        • you have satisfied a condition of release with a nil cashing restriction
         
       
    • subtracting any personal injury or structured settlement contributions that have been paid into your super funds.

    Accumulation phase value

    Your accumulation phase value (APV) is the total amount of super benefits that would be payable if you had voluntarily ceased a super interest at the time of calculation. Generally, this is the withdrawal value for an accumulation fund.

    Alternatively, the superannuation regulations may specify a different method for determining the accumulation phase value if you have a defined benefit interest and you are not in retirement phase.

    The accumulation phase value also includes:

    • certain deferred super income streams
    • transition-to-retirement income streams that are not in the retirement phase
    • super income streams that have not complied with the pension or annuity standards or a commutation authority.

    Self-managed super funds (SMSFs) need to provide an APV on a transfer balance account report (TBAR) for the 2016–17 financial year in certain circumstances. For example, if the SMSF member has 100% of their interest in the accumulation phase at 30 June 2017, then providing the APV is only required when the difference between the APV and the closing account balance of the SMSF member’s accumulation phase assets is not limited to the value of exit fees, administration fees and realisation costs. The difference will be the amount of the APV to be reported.

    If not provided, the member's APV will be calculated as the difference between the closing account balance from the SMSF annual return and the value of the member's transfer balance account for the SMSF at 1 July 2017.

    Retirement phase value

    Your retirement phase value is worked out using your transfer balance account at the end of 30 June, with modifications if you either:

    • have a certain account-based super income stream or streams
    • have made structured settlement contributions to your super fund.

    For account-based super income streams, the debits and credits in the transfer balance account are disregarded. Instead, your modified transfer balance includes the current value of the super interest that supports the account-based super income stream at the end of 30 June of the relevant financial year. The current value is the amount that would become payable if you were to voluntarily cease the interest.

    If you only have account-based income streams, generally your retirement phase value will simply reflect the current value of those income streams.

    All other super income streams keep the transfer balance account value, with modifications still required if you have made a structured settlement contribution to your super fund. In addition, certain transfer balance items are still taken into account (such as credits for excess transfer balance earnings and debits for non-commutable excess amounts).

    Outstanding limited recourse borrowing arrangement amount

    From 1 July 2018, SMSFs that start a limited recourse borrowing arrangement (LRBA) must include the outstanding limited borrowing arrangement amount at 30 June each income year when specific criteria are met.

    This change doesn’t include the refinancing of an existing LRBA that was entered into before 1 July 2018 and is refinanced on or after 1 July, where the following apply:

    • the new borrowing is secured by the same asset or assets as the old borrowing
    • the refinanced amount is the same or less than the existing LRBA.

    The outstanding balance of a relevant LRBA at 30 June will be reported in the member information section of the SMSF annual return and included in the member's total superannuation balance (TSB).

    Reporting of the outstanding balance of a relevant LRBA is required if either of the following applies:

    If the fund has an impacted LRBA and a member has met either of the above criteria, the fund must report the outstanding LRBA amount in that member‘s section of the SMSF annual return.

    Total superannuation balance transitional period

    There are transitional provisions for working out your retirement phase value of your total superannuation balance at the end of 30 June 2017 because a transfer balance account does not commence until 1 July 2017. The transitional arrangements apply so that your transitional transfer balance at the end of 30 June 2017 is equal to:

    • the sum of your transfer balance credits just after the start of 1 July 2017
    • less any debits in relation to payment splits (if applicable).

    This is subject to the transfer balance modifications for account-based income streams.

    What's affected by your total superannuation balance

    Total superannuation balance is relevant when working out eligibility for the following.

    • Carry forward concessional contributions – From 1 July 2019 if your total superannuation balance is less than $500,000 at the end of 30 June of the previous financial year you may be able to increase your concessional contributions cap. To do so you must have unused concessional contributions cap space for one or more of the previous five year, starting from 2018–19. The first time you will be required to know your total superannuation balance for the concessional contributions cap carry forward measure will be the 30 June 2019.
    • Non-concessional contributions cap and the bring forward of your non-concessional contributions cap – From 1 July 2017 if on 30 June of the previous financial year your total superannuation balance is below $1.6 million you may be eligible for a non-concessional contributions cap above zero. You may also be eligible to bring forward your non-concessional contributions cap of two or three times the annual non-concessional cap depending on your total superannuation balance.
    • Government co-contribution – From 1 July 2017 in addition to the existing eligibility requirements, you will be eligible for the government co-contribution in a financial year if  
      • your non-concessional contributions do not exceed your non-concessional contributions cap for the relevant financial year
      • on 30 June of the previous financial year, your total superannuation balance is less than the general transfer balance cap ($1.6 million from 2017–18) that financial year.
       
    • Spouse tax offset – From 2017–18, there are additional eligibility requirements to meet to be entitled to the tax offset    
    • Segregated asset method – From 2017–18, SMSFs and regulated super funds with fewer than five members (small-APRA funds), will not be able to use the segregated asset method to calculate exempt current pension income if at any time in the year, the fund has a retirement phase interest, and all of the following apply  
      • a person has a total superannuation balance exceeding $1.6 million just before the start of that year
      • the same person has a super interest in the fund at any time during the year
      • the same person is the retirement phase recipient of a superannuation income stream just before the start of the year (from the fund or another provider).
       

    Example: Total superannuation balance

    Andy is 50 years old and earned $35,000 in 2018–19 and 2019–20.

    Andy’s employer made employer (before-tax) contributions to Andy’s superannuation fund of $3,500 per year.

    Andy also made $10,000 in non-concessional (after-tax) contributions to super each financial year.

    Andy received a structured settlement payment in June 2015 of $1,000,000 due to an accident at work Andy advised both funds and made a non-concessional contribution of $500,000 to each fund.

    Andy has two accumulation super accounts with two different super funds. They have a balance of $700,000 each on 30 June 2020.

    Andy does not have a transfer balance account.

    On 30 June 2020 Andy’s total superannuation balance is $400,000: [$1,400,000 (total accumulation accounts) − $0 (transfer balance account) − $0 (rollovers) − $1,000,000 (structured settlement)].

    On 30 June 2020, Andy’s total superannuation balance is $400,000, being:

    • the value of his accumulation accounts ($1.4 million)
    • minus his $1 million structured settlement contributions.

    Andy is under 65 and his total superannuation balance at the end of 30 June 2020 is less than $500,000. Therefore he:

    • has contributed $7,000 in concessional contributions since 1 July 2018 and has $43,000 available in catch up concessional contributions along with his annual $25,000 concessional contributions cap available to use in 2020–21
    • can make up to $300,000 in non-concessional contributions without exceeding his cap in 2020–21
    • has an income of $35,000 and will be entitled to a Government Co-contributions payment if he makes non-concessional contributions again in 2020–21 of any amount less than $300,000 and his total superannuation balance remains below $1.6 million.
    End of example

     

    Example: LRBA amount – condition of release with nil cashing restriction

    Harry and Beth are members of their SMSF, the H&B Superannuation Fund. Harry is aged 65 years and Beth is aged 60 years. They have not commenced any superannuation income streams from their SMSF. Neither Harry nor Beth holds an interest in any other superannuation fund.

    As at 28 June 2019, Harry’s balance in the SMSF is $600,000 and Beth’s balance is $400,000. These balances are held in cash.

    On 29 June 2019, the SMSF enters into an LRBA covered by subsection 67A(1) of the SISA with a commercial lender to borrow $1 million. It uses the $1 million it borrows together with $500,000 that it held in cash to purchase a commercial property for $1.5 million.

    Of the $500,000 cash used to purchase the commercial property, 60% ($300,000) was supporting Harry’s superannuation interest and the other 40% ($200,000) was supporting Beth’s superannuation interest. These percentages also reflect the extent to which the commercial property supports Harry and Beth’s superannuation interests.

    At the end of 30 June 2019, the SMSF has total assets of $2 million made up of the market value of the commercial property of $1.5 million and $500,000 in cash. The SMSF also has a liability of $1 million.

    Harry’s total superannuation balance at the end of 30 June 2019 is the sum of steps 1, 2, 3 and 4 reduced by step 5.

    • Step 1 – Accumulation phase value
      • Value of Harry’s superannuation interest that is not in retirement phase is $600,000 (made up of $300,000 cash and $300,000, being 60% of the net value of the property)
       
    • Step 2 – Transfer balance = $0
    • Step 3 – Rollover superannuation benefits = $0
    • Step 4 – LRBA amounts= $600,000
      • As Harry is aged 65 years, he has met a relevant condition of release with a nil cashing restriction. His total superannuation balance will include an LRBA amount. The value of Harry’s LRBA amount is $600,000 which is 60% of the value of the outstanding balance of the LRBA of $1 million.
       
    • Step 5 – Structured settlement contributions = $0
      • Harry’s total superannuation balance at the end of 30 June 2019 is $1.2 million.
       

    Beth’s total superannuation balance at the end of 30 June 2019 is the sum of steps 1, 2, 3 and 4 reduced by step 5.

    • Step 1 – Accumulation phase value
      • Value of Beth’s superannuation interest that is not in retirement phase is $400,000 (made up of $200,000 cash and $200,000, being 40% of net value of property)
       
    • Step 2 – Transfer balance = $0
    • Step 3 – Rollover superannuation benefits = $0
    • Step 4 – LRBA amounts = $0
      • There is no LRBA amount to be included as Beth does not satisfy a relevant condition of release with a nil cashing restriction, nor is the lender an associate of the superannuation fund.
       
    • Step 5 – Structured settlement contributions = $0
      • Beth’s total superannuation balance at the end of 30 June 2019 is $400,000.
       
    End of example

    See also:

    • LCG 2016/12 Superannuation reform: total superannuation balance

    The difference between $1.6 million transfer balance cap and $1.6 million total superannuation balance

    The transfer balance cap introduces a new limit on the amount you can transfer and hold in retirement phase to support an income stream over the course of your lifetime. You will be liable to pay excess transfer balance tax if your transfer balance account exceeds the cap limit.

    The total superannuation balance has been introduced as a way to value your super interests on a given date to determine your eligibility for various super measures.

    The general transfer balance cap was set at $1.6 million from 1 July 2017. This means that you will need to comply with two separate $1.6 million limits from 1 July 2017:

    • the transfer balance cap limit on the value of the interests that support your retirement phase income streams
    • your total superannuation balance in order to determine your  
      • non-concessional contributions cap
      • non-concessional contributions bring-forward arrangement
      • carry forward concessional contributions
      • government co-contribution eligibility.
       

    The general transfer balance cap is subject to indexation in $100,000 increments on an annual basis in line with the consumer price index. The total superannuation balance limit is equal to the general transfer balance cap.

    Value of transfer balance account and total superannuation balance

    Your transfer balance account and total superannuation balance are calculated differently.

    Your transfer balance account is calculated on amounts that you transfer into retirement phase to support a pension or annuity over the course of your lifetime.

    The transfer balance account works in a similar way to a bank account. Amounts you transfer to, or are otherwise entitled to receive, from the retirement phase give rise to a credit (increase) in you transfer balance account.

    Certain transfers out of the retirement phase give rise to a debit (decrease) in your transfer balance account. The total value of all of the credits and debits to your transfer balance account at the end of a financial year, will count towards the calculation of your total superannuation balance, with modifications for account-based income streams and payment splits.

    Example: Transfer balance account and total superannuation balance

    As of 1 April 2017, Fred is receiving an account-based pension valued at $2 million. On 28 June 2017, Fred commutes $500,000 from his pension and transfers it back into his super accumulation account.

    On 18 August 2017, Fred makes $50,000 in voluntary non-concessional contributions to his fund.

    Fred has a personal transfer balance cap of $1.6 million for 2017–18. Fred has a transfer balance account of $1.5 million, so is within his personal transfer balance cap.

    Fred’s total superannuation balance as of 30 June 2017 was $2 million ($500,000 in the accumulation phase of his super fund and $1.5 million in his transfer balance account). As this exceeds the general transfer balance cap, his $50,000 contribution will be treated as excess non-concessional contributions.

    End of example

    Next step:

    See also:

    • LCR 2016/12 Superannuation reform: Total superannuation balance

    If you go over the non-concessional contributions cap

    Once we receive and assess your financial information, we let you know if you went over the caps by sending you a determination, which explains your options.

    If you have exceeded your non-concessional contributions cap, you must lodge a tax return for that year. If you have not lodged your tax return within 28 or more days of your due date, we will issue you with your determination.

    If you do not wish to receive your excess non-concessional superannuation contribution determination before you have lodged your tax return, either you or your tax professional will need to request a deferral of your lodgment before the due date.

    If you go over the non-concessional cap, you can withdraw the excess non-concessional contributions, and any earnings. The earnings would then be included in your income tax assessment.

    If you choose not to withdraw your excess contributions, they are taxed at the top marginal tax rate.

    To work out if you have gone over the non-concessional contributions cap, we look at your date of birth and assess the information:

    • reported to us by your super fund
    • you report in your tax return.

    You can choose how your excess non-concessional contributions are taxed

    You can choose how your contributions in excess of the non-concessional cap are taxed. You can't change your decision once you make it.

    From 2013–14 onwards

    For most people it is easiest to do nothing. We will ask your super funds to release and send amounts to us. We will also amend your income tax assessment to include your associated earnings. You will pay tax on your associated earnings at your marginal tax rate.

    We will use the money released to pay any tax or Australian Government debts and refund any remaining balance to you.

    If you have no money in super, we will amend your income tax assessment to include your associated earnings amount. You will pay tax on your associated earnings at your marginal tax rate.

    If your only super interest is held in a defined benefit fund or a non-commutable super income stream and the fund cannot or will not voluntarily release we will send you an excess non-concessional contributions tax assessment.

    Alternatively you have 60 days from the date of your determination, to choose one of the following options:

    Option 1 – release the excess from your super funds

    You can elect to release all your excess non-concessional contributions and 85% of your associated earnings from your super funds.

    The full associated earnings amount stated in your determination will be included in your assessable income and taxed at your marginal rate of tax. A non-refundable tax offset equal to 15% of your associated earnings is applied to recognise any tax paid by your super fund.

    We will issue a release authority to the super funds you nominate and they will pay this amount directly to us.

    If you choose this option

    You must nominate one or more super funds to release the amount from.

    Details of the super funds must be provided on the election form.

    When you complete the excess non-concessional contributions election form:

    • We send a release authority to the super funds you nominate. They pay an amount to us in total equal to your excess non-concessional contributions amount and 85% of the associated earnings amount. Currently they have 21 days from the release authority being issued to make the payment. From 1 July 2018 super funds will have 10 working days to action a release authority.
    • We amend your income tax assessment by including the full amount of the associated earnings as assessable income and providing a non-refundable tax offset equal to 15% of these associated earnings. We send you a notice of amended assessment, which may require you to pay an amount to us.
    • When your fund(s) release the money they will send it us, we will use the money to offset any ATO or Commonwealth debts you may have and pay any remaining balance to you.
    Option 2 – leave your excess non-concessional contributions in your super funds

    If you choose not to release your excess non-concessional contributions from your super funds, you receive an excess non-concessional contributions tax assessment. The excess amount is taxed at the highest marginal tax rate. You must elect a fund to release your excess non-concessional contributions tax from.

    You must select this option if your only fund is a defined benefit and the fund will not release amounts.

    See also:

    Associated earnings

    The associated earnings amount recognises your excess non-concessional contributions amount benefited from investment in your super fund.

    How associated earnings are calculated

    The associated earnings amount is calculated using three key elements.

    1. The excess non-concessional amount – the non-concessional contributions amount above your cap.
    2. The associated earnings rate – the rate used to calculate associated earnings is the average of the general interest charge rates for the four quarters of the relevant financial year the excess non-concessional contributions were made.
    3. The associated earnings period – the period used to calculate associated earnings is from 1 July of the financial year the excess contributions were made and ends on the date of the original excess non-concessional contributions determination letter.

    The associated earnings rate is applied on a daily compounding basis to the excess non-concessional amount for the length of the associated earnings period.

    Impact of increasing assessable income

    When the associated earnings amount is included in your assessable income, it may have flow-on consequences to other benefits and payments, such as:

    • child support
    • Centrelink benefits
    • super co-contributions
    • Medicare levy surcharge
    • Division 293 tax
    • eligibility for pay as you go instalments.

    Example: Working out how your excess non-concessional contributions are taxed

    In 2017–18, Reginald makes non-concessional contributions and exceeds his non-concessional contributions cap by $100,000.

    He already received his notice of income tax assessment for 2017–18 with taxable income of $140,000.

    We determine the associated earnings amount is $19,000 and give Reginald an excess non-concessional contributions determination stating:

    • an excess contributions amount of $100,000
    • an associated earnings amount of $19,000
    • a total release amount of $116,150 ($100,000 plus 85% of the associated earnings amount of $19,000).

    Reginald has 60 days from the determination letter issue date to make an election and give it to us.

    If Reginald chooses option 1 – release amounts from super

    Reginald decides to release $116,150 from his super and have the associated earnings included in his assessable income.

    He logs onto his myGov account and completes the excess non-concessional contributions election form, choosing option 1 and nominating the superannuation fund he wants the amount released from.

    After receiving the valid election, we add Reginald’s associated earnings amount of $19,000 to his assessable income. We send Reginald a notice of amended income tax assessment with:

    • amended taxable income of $159,000 ($140,000 plus $19,000)
    • a non-refundable tax-offset of $2,850 (15% of $19,000)
    • an amount payable of $4,180.

    We also send Reginald’s nominated super fund a release authority requiring the fund to release $116,150 from his super.

    The super fund pays us $116,150 in compliance with the release authority. The released amount will be offset against any outstanding tax or other Australian Government debts before any remaining balance is refunded to the Reginald. The super fund notifies us and we notify Reginald of the payment of $116,150.

    If Reginald chooses option 2 – pay excess non-concessional contributions tax

    Reginald logs onto his myGov account and completes the excess non-concessional contributions election form, choosing option 2 to pay excess non-concessional contributions tax on $100,000.

    He also advises us which fund he would like a release authority issued to in order to pay his tax liability.

    We issue Reginald with an excess non-concessional contribution tax assessment for $47,000 (47% of $100,000).

    We also send Reginald’s nominated super fund an excess non-concessional contributions tax release authority requiring the fund to release $47,000 from his super.

    The super fund pays us $47,000 in compliance with the release authority. The released amount will be offset against Reginald's debt. The super fund notifies us and we notify Reginald of the payment of $47,000.

    If Reginald does not choose any option

    We don't receive a valid election form from Reginald within 60 days of the determination letter issue date. We will default him into option 1 and follow the process of releasing the excess non-concessional contributions from his super.

    We add Reginald’s associated earnings amount of $19,000 to his assessable income. We send Reginald a notice of amended income tax assessment with:

    • an amended taxable income of $159,000 ($140,000 plus $19,000)
    • a non-refundable tax-offset of $2,850 (15% of $19,000)
    • an amount payable of $4,180.

    We also send a release authority to one of Reginald's fund's requiring the fund to release $116,150 from his super.

    The super fund pays us $116,150 in compliance with the release authority. The released amount will be offset against any outstanding tax or other Australian Government debts before any remaining balance is refunded to the Reginald. The super fund notifies us and we notify Reginald of the payment of $116,150.

    End of example

     

    Example: Excess concessional and non-concessional contributions, and defined benefit funds

    Andrew is a member of a defined benefit fund and his employer is required to make contributions on his behalf. These contributions are normally non-concessional contributions; however, Andrew has arranged for these contributions to be salary sacrificed as concessional contributions.

    Andrew's concessional contributions exceed his concessional contributions cap by $5,000 during 2017–18. And, after receiving an excess concessional contributions determination, Andrew does nothing, leaving his excess concessional contributions in super.

    Andrew is subject to the top marginal tax rate in 2017–18, so his excess concessional contributions are taxed at 47% (including the Medicare levy). Andrew receives an offset of 15% for the concessional contributions tax.

    Andrew's total superannuation balance at 30 June 2017 is greater than $1.6 million, which reduces his non-concessional contribution cap for 2017–18 to nil. Consequently, Andrew's excess concessional contributions are also excess non-concessional contributions.

    Andrew can't release the excess non-concessional contributions amount because he is a member of a defined benefit fund. Therefore, Andrew has to pay excess non-concessional contributions tax of 47% (in addition to the 47% income tax paid on the same contributions when they were excess concessional contributions).

    In this case, Andrew's decision to enter into a salary sacrifice arrangement for his compulsory employer contributions resulted in the contributions being taxed at 94%. If Andrew had not made this arrangement, the same contributions would have been taxed as excess non-concessional contributions only at 47%.

    End of example
      Last modified: 04 Oct 2019QC 19749