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Total superannuation balance

Accumulation phase value

Section: 18.4

Accumulation phase interests include any superannuation interests that are not in retirement phase.

Accumulation phase interests include:

  • accumulation accounts
  • deferred income streams that have not yet become payable and where the recipient has not satisfied the retirement, reaching age 65, terminal medical condition or permanent incapacity condition of release.
  • transition to retirement income streams where the recipient has not satisfied the retirement, reaching age 65, terminal medical condition or permanent incapacity condition of release.
  • non-commutable allocated pensions or annuities where the recipient has not satisfied the retirement, reaching age 65, terminal medical condition or permanent incapacity condition of release.
  • accruing defined benefit interests with a withdrawal value (see further details below).

The value of an accumulation phase interest (ie, the accumulation phase value) is:

  • if the regulations specify a way of valuing the interest, that value, or
  • the amount of superannuation benefits that would become payable if the client voluntarily ceased the interest at that time.

For accumulation accounts and account based income streams not in retirement phase (eg, transition to retirement income streams), the value will generally be the account balance at the date of measurement.

For accruing defined benefit interests, where a withdrawal value (lump sum equivalent) can be calculated it is included in the accumulation phase value. However, there is uncertainty as to whether these amounts are included in a client's total superannuation balance where there is no lump sum equivalent.

Example: accumulation phase value

Vince wants to determine his total superannuation balance on 30 June 2019. He has not met a full condition of release. He has two superannuation interests:

  • Accumulation account (balance $400,000 at 30 June 2019)
  • Transition to retirement pension (balance $300,000 at 30 June 2019).

As the transition to retirement pension is not a retirement phase income stream, the account balance at 30 June 2019 will be included in Vince's accumulation phase value.

The value of Vince's accumulation phase value at 30 June 2019 is: $400,000 + $300,000 = $700,000

Vince's 'total superannuation balance' is the sum of:

  1. Accumulation phase values: $700,000
  2. Retirement phase values: nil
  3. Rollover superannuation benefits: nil

Therefore the value of Vince's total superannuation balance at 30 June 2019 is $700,000.

Reserves - accumulation phase value

Where a fund, such as an SMSF, maintains reserves, the amount held in those reserves will not be included in the value of a member's total super balance under the existing rules. This is because amounts held in a reserve do not form part of a member's interest in a fund.

However, the ATO has released SMSF Regulator's Bulletin SMSFRB 2018/1, where it outlines concerns regarding the use of reserves, and that it expects SMSFs to maintain reserves in very limited circumstances.

SMSFs - availability of the accumulation phase value

Where a client is a member of a SMSF, they may not know the value of their accumulation or retirement phase income streams until several months after the end of the financial year when the fund's annual return is completed.

In this case, members may have to delay making contributions until it is confirmed that the client's total superannuation balance is below the required threshold.

As the valuation of assets is important when determining total superannuation balance, trustees should follow the ATO valuation guidelines for self managed superannuation funds available at:

Limited recourse borrowing arrangements and Total Super Balance

In May 2018, the Government introduced a Bill to include a proportion of the outstanding balance of certain Limited Recourse Borrowing Arrangements (LRBAs) established after 30 June 2018 in the calculation of a member's total superannuation balance. Situations where this was proposed to apply included:

  • where the member has satisfied a condition of release with nil cashing restrictions (retirement, reaching age 65, terminal medical condition, permanent incapacity), or
  • where the member's interests in the fund are supported by assets subject to an LRBA between the SMSF and its associates.

However, this Bill had not progressed and lapsed when the 2019 Federal election was called. Therefore, for this proposal to become law, it will need to be reintroduced and passed by the new parliament.

Last modified: Wednesday, July 24, 2019