Transfer balance cap
Fund compliance with commutation authorities
If a member who has received an excess transfer balance determination:
- has not made a voluntary commutation of the crystallised reduction amount, or
- has not made an election to choose a different fund for a compulsory commutation
within the 60 day determination period, the ATO will issue a compulsory commutation authority to the fund provider identified in the default commutation notice.
The trustee must generally comply and commute the amount specified in the compulsory commutation authority within 60 days. A superannuation provider may choose not to comply with the commutation authority if the income stream is a capped defined benefit income stream or if the member is deceased.
The trustee is also required to notify the ATO and the member of compliance with the notice within 60 days after the commutation authority was issued. During the 60 day period, there is an expectation that the fund will make reasonable efforts to contact the member to seek instructions (eg which investment option/product does the member want commuted). The commuted amount can then be rolled back to accumulation phase (if it is not a death benefit income stream) or paid as a superannuation lump sum benefit payment.
Where a fund fails to comply with a commutation authority, the entire income stream will cease to be in retirement phase (and no longer qualify for the earnings tax exemption), from the start of the financial year in which the fund failed to comply with the commutation authority and all later financial years. In this case, the member's transfer balance account will be debited by the value of the income stream.
Last modified: Thursday, July 25, 2019