What is a commutation authority
A commutation authority is a notice we issue to a super fund when a member has exceeded their transfer balance cap (TBC) and we've sent the member an excess transfer balance determination. The member has either:
- not commuted the excess amount in the determination in full by the due date
- made an election for us to send a commutation authority to their fund to have the excess amount commuted.
The commutation authority details the amount that must be commuted from the specified income stream for that member.
Commuting the full amount
You must commute the full amount, including cents, by the due date stated in the commutation authority, from the income stream stated in the notice. If you don't allow cents to be commuted, you must round up.
You must lodge a TBAR by the due date to tell us you have complied in full.
Commuting a partial amount
If you can’t commute the full amount stated on the commutation authority because:
- the amount is higher than the value of the interest supporting the income stream, you must commute the value of the interest and close the account. You should consider any pro-rata minimum pension payments that need to be met when calculating the value of the interest than can be commuted.
- the income stream account stated in the notice was closed before we issued a commutation authority.
You must also lodge a TBAR by the due date to tell us you've complied in part.
What to do if you or your member disagree with the commutation authority
If either you or your member disagree with the commutation authority:
- you can't object to the commutation authority
- your member can't direct you not to comply.
The commutation authority only authorises you to commute the specified income stream.
If you commute another income stream, you haven't complied with the commutation authority. The member is now at risk of having their assets removed from retirement phase twice, given this commutation doesn't remove your obligation to comply with the commutation authority.
To minimise the impacts on your member you should report the member-initiated commutation to us as soon as possible. We may be able to revoke the commutation authority we've sent you.
If the member has sufficient funds in their preferred account to commute the full amount and you consider there is time to process and report it to us in time for us to revoke the commutation authority, you may consider choosing to do so.
If you follow the member’s request you need to report this to us as soon as possible, no later than the due date stated in the commutation authority, to allow us to revoke the commutation authority. If you don't report this to us in time for us to do this, you'll still need to comply with the commutation authority. The consequences of not complying with the commutation authority will still apply.
If you think the amount on the commutation authority doesn't take into account a prior commutation this may be because the member commuted their income stream after the due date on the Excess Transfer Balance (ETB) determination or there was a delay in reporting the commutation to us.
If the member disagrees with the way we calculated their excess, they can seek an extension of time to lodge an objection to the ETB determination. However, this doesn’t remove your obligation to comply with the commutation authority by the due date, once it’s issued.
If an objection is lodged to the ETB determination and we allow the objection in full, then we will revoke or amend the commutation authority, if we are able to do this, by the due date. Otherwise, you’ll still need to action the commutation authority by the due date.
For more information, see Transfer balance cap, Super transfer balance account report instructions, LCR 2016/9 Superannuation reform: transfer balance cap.