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Total Superannuation Balance

The ATO has Law Companion Guideline LCG 2016/12 on how an individual’s “total superannuation balance” will be calculated from 30 June 2017. As part of the super reforms, the concept of an individual’s “total superannuation balance” will apply from 1 July 2017 as a method for valuing an individual’s total superannuation interests. An individual’s total superannuation balance will be used to determine eligibility for various super concessions, including the $1.6m balance limit for making non-concessional contributions, Government co-contributions, the spouse contributions tax offset, carry forward of unused concessional contributions and the SMSF segregation method. Total superannuation balance An individual’s total superannuation balance at a particular time (ie 30 June) is broadly the sum of:

  • the accumulation phase value of the individual’s superannuation interests that are not in the retirement phase. The accumulation phase value covers transition to retirement income streams (TRIS), non-commutable allocated pensions or annuities, and deferred superannuation income streams that have not yet become payable. The “value” of a superannuation interest at a particular time is the total amount of all the superannuation lump sums that could be payable from the interest if the individual voluntarily caused the interest to cease at that time. Otherwise, the regulations may specify a method for determining the value of a superannuation interest;
  • if an individual has a transfer balance account, their transfer balance or modified transfer balance (but not less than nil). If an individual is the recipient of certain account-based income streams in the retirement phase, their transfer balance is subject to modifications for the purpose of calculating their total superannuation balance. Credits that have arisen in an individual’s transfer balance account from becoming a retirement phase recipient of an account-based income stream are disregarded. Similarly, debits are disregarded if they have arisen from a commutation, a family law payment split, an income stream that fails to comply with the standards, a fund failing to comply with a commutation authority, or an event that results in the superannuation interest being reduced (eg for fraud, dishonesty or bankruptcy). However, a credit in an individual’s transfer balance account that has arisen from excess transfer balance earnings is not disregarded. A debit is also not disregarded where it has arisen in relation to a non-commutable excess transfer balance. The individual’s transfer balance is then increased by the total amount of superannuation lump sums that would become payable if the individual voluntarily caused the superannuation interest to cease at that time; and
  • the amount of any roll-over superannuation benefit not already reflected in the individual’s accumulation phase value of their superannuation interests or their transfer balance. This component captures any roll-over superannuation benefits paid at or before 30 June, but not received by the complying superannuation plan until after that time,

The sum of the amounts calculated must be reduced by any structured settlement contributions. Example Shane commenced both an account-based pension ($500,000) and a defined benefit lifetime pension ($500,000) on 1 December 2017. He has no remaining superannuation interests in accumulation phase. Shane’s transfer balance account commenced on 1 December 2017. At the end of 30 June 2018, the amount that would be paid to Shane if he voluntarily ceased the account-based pension is $400,000. Shane’s total superannuation balance at the end of 30 June 2018 is calculated as follows: Step 1: accumulation phase value = zero Step 2: modified transfer balance Shane’s transfer balance at the end of 30 June 2018 is $1,000,000:

  • Disregard the amount of the credit that has arisen in respect of the account-based pension ($500,000).
  • Increase the balance by the amount that would become payable if the account-based pension was voluntarily ceased at the end of 30 June 2018 ($400,000).

The credit to Shane’s transfer balance account relevant to his defined benefit lifetime pension is not disregarded. Modified transfer balance is $1,000,000 – $500,000 + $400,000 = $900,000. Step 3: rollover superannuation benefits = zero Step 4: structured settlement contributions = zero Shane’s total superannuation balance at the end of 30 June 2018 is $900,000.

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