“Total Superannuation Balance” is a new concept introduced in the super reform. It directly affects (1) eligibility for unused concessional contributions cap carry forward; (2) eligibility for non-concessional contributions cap, and bring-forward rules (3) eligibility for government co-contribution and tax offset for spouse contributions (4) eligibility to use segregated method to calculate exempt current pension income.
Broadly, “Total Superannuation Balance” as the name suggests, means total value of one’s superannuation, including the accumulation phase value, and the retirement phase value of all his superannuation interests in all his super funds. For an SMSF member with no other superannuation interests outside the SMSF, it simply means the sum of his accumulation balance and pension balance in the SMSF. This amount is increased by excess transfer balance earnings if there is any. When an SMSF member has superannuation interests in super funds outside the SMSF, those interests are included in his “Total Superannuation Balance” as well.
Further adjustments are made for roll-overs in transit and structured settlement contributions. TRIS is considered not in the retirement phase, therefore it is included in the accumulation balance.
The example below calculates total superannuation balance as at 30 June 2018. A member commenced both ABP $2,000,000 and a defined benefit lifetime pension $100,000 on 1 December 2017. He noticed a month later on 1 January 2018 that he had an excess transfer balance of $500,000 and commuted $500,000 of the ABP and received the commutation as lump sum. $3,795 is calculated as excess transfer balance earnings for the month. On 30 June 2018, the value of his accumulation account in the super fund is $300,000 and the value of the ABP is $1,460,000.
|01.12.17||Commenced defined benefit lifetime pension||$100,000||Yes|
|01.01.18||Noticed excess transfer balance||$500,000||No|
|01.01.18||Took out lump sum||$500,000||No|
|01.01.18||Calculated excess transfer balance earnings||$3,795||Yes|
|30.06.18||Accumulation Acct. Bal||$300,000||Yes|
|30.06.18||Value of ABP||1,460,000||Yes|
|30.06.18||Total Super Balance||1,863,795|
If in the above example, on 30 June 2018, the member requests $100,000 roll-over from the $300,000 accumulation balance to another super fund, the $100,000 will be in transit and not included in any fund. The accumulation balance is reduced to $200,000 but the $100,000 roll-over is added to the total superannuation balance. The result is the same as in the above example.
If in the above example, the $2m to start the ABP is from a structured settlement contribution, then there is no excess transfer balance in this new scenario. Therefore we assume the member does not take out the $500k lump sum. Suppose the ABP on 30 June 18 is valued at $1.9m, the total superannuation balance is $1.9m – 2m + 300k (accumulation) + 100k (defined benefit) = $300k.
In LCG 2016/D12, it’s easy to work out the accumulation phase balance. For pension phase, we work with transfer balance as a starting point. Then we disregard certain credits and debits included in the transfer balance.
Credits that have arisen from you becoming a retirement phase recipient of a superannuation income stream are disregarded (ABP commencement value is subtracted from transfer balance).
Debits that have arisen from a commutation of a superannuation income stream in the retirement phase are disregarded (Lump sum withdrawal is added back to transfer balance).
Credits arising from excess transfer balance earnings are not disregarded (Excess transfer balance earnings stay as part of the transfer balance).
Transfer balance is modified to reflect the current value of account-based superannuation interests in retirement phase. The current value is the amount that would be paid if the member voluntarily caused the superannuation interest to cease at that time. (ABP actual value is used).
Defined benefit income stream is already included in the transfer balance account. This balance stays as it is.
Explanatory Memorandum paragraph 5.25 says: Using this method ensure that an individual’s total superannuation balance is as up-to-date as possible without imposing an additional obligation on superannuation income stream providers to calculate other superannuation interest balances, for example for defined benefit interests, on an annual basis, as these interests have already been calculated for the purposes of the transfer balance account.
Total superannuation balance is defined in ITAA 1997 section 307.230