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Transfer balance cap

Transfer balance account credits

Section: 19.7

Generally, a credit arises in a client's transfer balance account when the client commences a retirement phase income stream.

The following amounts are credited to a client's transfer balance account:

Type of income stream Examples of income streams Amount of credit Date of credit
Retirement phase income streams commenced before 1 July 2017
Account based income streams (other than market linked/term allocated income streams)
  • account based income streams
  • allocated pensions
  • allocated annuities
  • transition to retirement income streams where, prior to 1 July 2017, the client was age 65 or over or the client had notified the trustee that they were retired, permanently incapacitated or terminally ill.
Account balance at 30 June 2017 1 July 2017
Capped defined benefit income streams
  • complying1 lifetime income streams
  • lifetime annuities with no commutation rights at commencement of the policy2
  • complying1 life expectancy income streams
  • complying1 market linked/term allocated income streams
  • other income streams prescribed by legislation to be capped defined benefit income streams3
Special value4 at 30 June 2017 1 July 2017
Non account-based, non-capped defined benefit income streams
  • flexi pensions
  • non-complying lifetime income streams
  • non-complying life expectancy income streams
  • commutable fixed term annuities
Value at 30 June 2017 1 July 2017
Reversionary death benefit income streams
  • reversionary account based income streams
  • reversionary lifetime pensions
  • reversionary flexi-pensions
Reversionary pensions that reverted prior to 1 July 2017 are valued at 30 June 2017.

The value will be:

  • account balance of account based incomes streams
  • special value4 of capped defined benefit income streams
  • value5 of non-account based, non capped defined benefit income streams
  • If deceased died in 2016/17:12 months from date of death
  • If deceased died prior to 2016/17: 1 July 2017
Retirement phase income streams commenced on or after 1 July 2017
Account based income streams
  • account based income streams
  • allocated pensions
  • allocated annuities
  • market linked income streams/term allocated pensions
Purchase price Date of commencement
Transition to retirement income streams entering the retirement phase6
  • transition to retirement income streams
Account balance on starting day (starting day is the day the income stream is first in the retirement phase7) Date the income stream is first in the retirement phase7
Capped defined benefit income streams
  • complying1 lifetime pensions
    • lifetime pensions that meet the requirements of SIS reg 1.06(2)
Special value4 at starting day Date of commencement
Deferred superannuation income streams entering the retirement phase Deferred annuities The value is the greater of:
  • the sum of each amount of consideration paid for the interest and associated earnings calculated in accordance with the regulations.
  • the total amount of superannuation benefits that would become payable if the individual voluntarily caused the interest to cease.
Date becomes a retirement phase income stream i.e. client has met a condition of release8
Non-account based, non-capped defined benefit income streams
  • flexi pensions
  • all lifetime annuities (commutable or non-commutable)
  • all life expectancy annuities
  • commutable defined benefit pensions
    • commutable fixed term annuities
Value5 at starting day Date of commencement
Reversionary death benefit income streams that reverted on or after 1 July 2017
  • reversionary account based income streams
  • reversionary lifetime pension
  • reversionary life expectancy income streams
  • reversionary market linked income streams
Reversionary pensions where the deceased died on or after 1 July 2017are valued at date of death.

The value will be:

  • account balance of account based income streams
  • special value4 of capped defined benefit income streams
  • value5 of non-account based, non-capped defined benefit income streams
12 months after date of death
Other transfer balance credits
Notional earnings Applies when the client's transfer balance account exceeds their personal cap. (not calculated if client has only capped defined benefit income streams) Excess balance x GIC rate9 number of days in breach up to date of determination Daily
Repayments of LRBAs from accumulation phase assets10 Using money from a segregated accumulation phase bank account to pay down a loan secured against a property that is in the segregated pension asset pool (applies to LRBA entered into on after 1 July 2017) Amount by which a member's retirement phase interest is increased Date of repayment
1 Purchased complying lifetime, life expectancy and market linked income streams are income streams that commenced prior to 20 September 2007 that may continue to receive either 50% or 100% asset test exemption for social security purposes (depending on the start date). By definition complying pensions had to meet the same SIS pension and annuity standards that are required for capped defined benefit income streams. There may be some purchased lifetime, life expectancy and market linked income streams that are not complying for social security purposes, but still meet the SIS pension and annuity standards required for capped defined benefit income streams. Among other requirements, capped defined benefit income streams have lifetime terms, no commutation rights (except in limited circumstances) and no residual capital value (RCV).

2 Capped defined benefit income streams generally have no commutation rights at commencement of the policy, and no RCV. Lifetime annuities that are not complying for social security purposes, but meet all the requirements of SIS reg 1.05(2) will be capped defined benefit income streams.

3 At the time of writing there are two categories of lifetime pension that have been prescribed to be capped defined benefit income streams. These are:

  • lifetime pensions that were in existence at 29 June 2007 and meet the SIS standards in SIS reg 1.06(2), but do not meet the rules regarding commutations and the variation and cessation of pension payments to a child of a deceased beneficiary.
  • lifetime pensions that commenced at any time and are provided on the grounds of invalidity under a public sector superannuation scheme and meet the SIS standards in SIS reg 1.06(2), but do not meet certain rules regarding variation, suspension or cessation of pension payments.

4 The special value of a capped defined benefit income streams is: Complying lifetime income streams (annual entitlement x 16). Complying life expectancy or term allocated pensions (annual entitlement x remaining term).

5 The value of a superannuation interest, for transfer balance account credit purposes, which is not a capped defined benefit income stream or account-based income stream, is determined by the regulations.

6 For TTRs to be in the retirement phase, the trustee must be notified if the client has met any of the three following conditions of release: retirement, permanent incapacity and terminal medical condition. If the fund is not notified of the condition of release the TTR is not in the retirement phase. A TTR is automatically in the retirement phase from the client's 65th birthday.

7 Includes transition to retirement income streams, where the original income stream may have commenced prior to 1 July 2017, but is becoming a retirement phase income stream of the current recipient for the first time on or after 1 July 2017.

8 Relevant conditions of release for deferred superannuation income streams to be in the retirement phase are: retirement, permanent incapacity and terminal medical condition and attaining age 65.

9 General Interest Charge rate.

10 A transfer balance credit will also arise where repayments are made to a limited recourse borrowing arrangement, arising under contracts entered into on or after 1 July 2017, and where the asset and loan involved in the LRBA arrangement are supporting (including partially) a client's retirement phase income stream interest but the repayments are sourced from assets that do not support the same income stream. These credits to a client's transfer balance account capture the value that is shifted from the accumulation phase to the assets supporting a retirement phase income stream. For example, if a client in a segregated fund is using SG contributions to their accumulation account to fund the LRBA repayments in their pension account, these repayments will trigger transfer balance credits in the client's transfer balance account.

Last modified: Wednesday, May 1, 2019