This document contains complex SMSF technical information and is aimed at individuals who have a comprehensive understanding of transfer balance caps.
We highly recommend that you gain the advice of an SMSF Specialist in order to assist you in monitoring the transfer balance cap within your fund. To find your nearest SMSF Specialist, use our Find a Specialist function.
Effective 1 July 2017, you are now subject to a $1.6 million transfer balance cap which limits the amount of assets that can fund your pension.
Amounts in excess of the lifetime cap will not attract the tax exemption for earnings from assets in retirement phase and are required to be held in the accumulation phase and income derived from these assets taxed at 15%.
Credits and Debits for the cap
- For members with superannuation income streams commenced before 1 July 2017, the total value of an individual’s superannuation interests supporting income streams at 30 June 2017 will be counted towards their $1.6 million transfer balance cap.
- The cap operates on the basis of “credits” counting to the cap and “debits” removing value from the cap.
- Credits are created by:
- the value of super interest supporting income streams on 30 June 2017,
- commencement of new superannuation income streams from 1 July 2017 onwards,
- the value of reversionary income streams when an individual becomes entitled to them, and
- notional earnings accruing to excess transfer balance amounts.
- Debits are created by:
- commutations of superannuation income streams or taking a lump sum,
- structured settlement payments contributed to superannuation, and
- certain payments arising from family law splits, fraudulent or void transactions.
- Credits are created by:
- Lump sum commutations do not count towards an individual’s minimum pension requirements under the new rules.
- Investment gains and losses do not alter the transfer balance cap, that is, they are not a credit. Income stream payments or investment losses do not change the transfer balance cap either, that is, they are not a debit.
- Reversionary pensions count towards the cap, but you have a 12 month period to deal with the reversionary pension before a credit arises and counts towards your cap.
- Pensions which are commenced with lump sum death benefit proceeds count towards the beneficiary’s cap on the date that they begin being paid to the beneficiary.
Exceeding the cap
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