Overview
From 1 July 2017, the government introduced a $1.6 million cap on the total amount that can be transferred into the tax-free retirement phase for account-based pensions. The cap is initially set at $1.6 million and will be indexed in line with the movements in the CPI in increments of $100,000. The transfer balance cap (TBC) measure commenced on 1 July 2017. If the member exceeds the TBC on or after this date, the member will have to remove the excess from one or more retirement phase income streams, and pay tax on the notional earnings related to that excess.
Transitional capital gains tax relief is available if the member is required to reduce the assets currently supporting superannuation income streams in order to comply with the TBC reform commencing on 1 July 2017. More information is covered in knowledge article, Capital gains tax (CGT) relief.
- TRIS will not count towards the transfer balance cap
- Special rules apply to capped defined income streams such as lifetime pensions and defined benefit pensions. For more information refer to Transfer balance cap - calculating the special value of a capped defined benefit income stream.
Transfer balance account
The transfer balance account is where the ATO records the transactions and tracks amounts in retirement phase. The transfer balance account determines whether a member has exceeded the transfer balance cap.
The transfer balance account commences on either:
- 1 July 2017, if there are existing retirement phase income streams on 30 June 2017, or
- the day the member first receives a retirement phase income stream
Example of transfer balance account credits and debits
|
Debits |
Credits |
|
Full or partial commutation of the prescribed account-based superannuation income stream in the retirement phase |
Value of the existing superannuation income streams in retirement phase as of 30 June 2017 |
|
Structured settlement contributions |
Value of the superannuation income stream in retirement phase from 1 July 2017 |
|
Payment splits due to divorce or relationship breakdown |
Death benefit income stream |
|
An event that results in your super interest being reduced (fraud or dishonesty; bankruptcy) |
Reversionary income streams |
|
Superannuation income streams that fail to comply with a commutation authority in respect of the prescribed account-based superannuation income stream |
Notional earnings that accrue on excess transfer balance amount |
|
Superannuation income streams that fail to comply with the relevant pension or annuity standards |
Repayment of an LRBA that increases the value of retirement phase superannuation income stream |
|
A non-commutable excess transfer balance |
|
Note: pension drawdown does not reduce the transfer balance.
Transfer balance account report
The transfer balance account report (TBAR) has been developed to advise the ATO when a transfer balance account event occurs where the information will be used to adjust a member's transfer balance account.
The TBAR has two purposes:
- Reporting transfer balance cap events
- Reporting information for a member's total super balance
Events that are reportable via the TBAR
An SMSF is required to report the following events:
- 30 June 2017 accumulation phase value in some scenarios
- retirement phase income streams in existence just before 1 July 2017
- any of the following events that occur on or after 1 July 2017
a. super income streams that have commenced in retirement phase
b. some limited recourse borrowing arrangement (LRBA) repayments*
c. pension commutations
d. compliance with a commutation authority issued by the Commissioner
e. personal injury (structured settlement) contributions
f. super income streams that stop being in the retirement phase, for example, because of the trustee failed to meet the minimum pension payment standards for an income stream.
The 2017-18FY SMSF Annual Return will provide the capacity for both APV and RPV amounts to be reported in a single lodgment. The TBAR form will not be used for this reporting.
TBAR event types
We have summarised the TBAR reportable event types in the table below:
|
TBAR type |
TBAR description |
Event details |
|
SIS |
Superannuation income stream |
A superannuation income stream in the retirement phase. Generally a right to receive a periodic payment from a superannuation interest, for example, a pension or annuity. This event type should also be reported for a reversionary income stream that commenced prior to 1 July 2016. |
|
LRB |
Limited recourse borrowing arrangement |
A credit will arise in the member's transfer balance account in relation to a payment made by a superannuation provider under an LRBA that was entered into or after 1 July 2017 where the payment will result in an increased value of the retirement phase income streams. Refer to the LCR 2016/9 for more information. |
|
IRS |
Reversionary income stream |
A superannuation income stream that automatically reverts to a nominated beneficiary on the death of its current recipient, where the income stream commenced on or after 1 July 2016. |
|
ICB |
Child death benefit income stream |
A dependant child who receives a death benefit income stream because of the death of a parent. This event type should also be reported for a reversionary child death benefit income stream that commenced prior to 1 July 2016. Refer to the ATO's website: New transfer balance cap – child death benefit recipients Child recipients of a death benefit income stream for more information. |
|
ICR |
Reversionary child death benefit income stream |
A superannuation income stream that automatically reverts to a dependant child because of the death of a parent, where the income stream commenced on or after 1 July 2016. Refer to the ATO's website, Child recipients of a death benefit income stream for more information. |
|
MCO |
Member commutation |
The process of ceasing, in whole or in part, a superannuation income stream and converting it into a superannuation lump sum. In all circumstances with exception to a Commissioner's commutation authority. The superannuation lump sum that arises from a commutation may be cashed out of the superannuation system or can be retained within the superannuation system subject to the cashing rules for superannuation death benefits. |
|
CC1 |
Commutation Authority |
The amount requested has been paid in full. |
|
CC2 |
Commutation Authority |
Unable to commute in full due to insufficient funds. |
|
CC3 |
Commutation Authority |
Unable to commute due to the member is deceased. |
|
CC4 |
Commutation Authority |
Unable to commute due to capped defined benefit income stream. |
|
SSP |
Personal Injury (Structured Settlement) |
Injury payments that a member contributes while notifying the provider that they are to be excluded from the non-concessional contributions cap. |
|
STO |
Income stream stops being in retirement phase |
Income stream stops being in retirement phase. |
|
APV |
Accumulation Phase Value |
This is the value of the accumulation interest that would become payable if the individual voluntarily caused the interest to cease at 30 June of the relevant financial year. |
|
RPV |
Retirement Phase Value |
This is the value of the retirement interest that would become payable if the individual voluntarily caused the interest to cease at 30 June of the relevant financial year. |
|
NTC |
Notional Taxed Contributions |
Uncapped Notional taxed contributions amount. These are not applicable to SMSFs. |
Events that are reportable but are not specifically addressed in the TBAR
The following events need to be reported to the ATO through a separate form called transfer balance event notification form:
- a payment for a personal injury and made a structured settlement contribution to the SMSF before 1 July 2007
- a family law payment split
- the value of retirement phase income stream was reduced because of an act of fraud or dishonesty and the offender was convicted
- the value of retirement phase income stream was reduced because some or all the assets supporting the retirement phase income stream were made available to the trustee in bankruptcy
Given these events are not part of TBAR electronic specification, they have to be lodged manually using the ATO's approved form.
Events that are not required to be reported via the TBAR
These events include:
- Pension drawdowns and other types of government assistance. These are not debits in the transfer balance account.
- Investment earnings or losses
- When assets supporting an income stream are exhausted
- Death of a member*
Lodgment channels
There are currently four channels you can use to report your TBAR obligations. Refer to the ATO website for more information.
|
Lodgment method |
Description |
SMSF trustee or administrator |
Tax agent |
No. of TBAR Events |
No. of Members |
No. of Funds |
|
Bulk data exchange (BDE) |
Submitting a data file through the Business Portal or Tax Agent Portal |
Yes |
Yes |
Multiple |
Multiple |
Multiple |
|
Spreadsheet version |
Attaching the spreadsheet to a Tax Agent Portal mail message |
No |
Yes |
Multiple |
Multiple |
Multiple |
|
Paper report |
Lodging the report by sending the completed report to the address provided on the form |
Yes |
Yes |
4 maximum |
Single Member |
Single Fund |
|
Online form |
Lodging the TBAR form electronically through ATO online services |
Yes |
N/A |
4 maximum |
Single Member |
Single Fund |
Class currently only supports the electronic file upload to the Tax Agent Portal via BDE.
How often and when to report the TBAR
The following table provided in one of the ATO's webinars will assist to work out the TBAR reporting due date for the 2017-2018 financial year.
We have summarised the content as below
|
Reportable Events |
SMSF with all member TSBs* < $1m (Annual Fund) |
SMSF with at least one of the member TSB ≥ $1m (Quarterly Fund) |
|
30 June 2017 Retirement Phase Income Stream Balance |
On or before 1 July 2018 |
On or before 1 July 2018 |
|
Reportable events after 1 July 2017 that are not related to Excess Transfer Balance Determination (ETB) or Commutation Authority issued by the ATO |
No later than the due date for lodging the annual return (i.e. for most funds it will be 15 May each year) |
The later of 28 Oct 2018 or 28 days after end of quarter in which the event occurred |
|
A voluntary member commutation of an income stream in response to an ETB determination issued by the ATO |
10 business days after the end of the month in which the commutation occurs |
|
|
Commutation Authority issued by the ATO |
Within 60 days of date of issue of the commutation authority |
|
*The TSB balance is determined at 30 June immediately before each year the first member of the fund starts their first retirement phase income stream in that SMSF. Once the reporting framework is set, SMSF trustees will not be expected to move between annual and quarterly reporting due dates, regardless of fluctuations to any of its members' balances.
Updates Class made to accommodate this change
|
Changes |
Description |
|
Additional data filters in the member console |
More filters have been added to the Member Console to assist you in identifying the trustee who has a pension balance over $1.6 million.
|
|
Bulk Pension Commutation |
A bulk pension commutation event has been added to allow you to quickly and easily commute pensions for the affected member who has a pension balance over $1.6 million. A shortcut has been added to the member console for the bulk pension commutation event and allows you to easily navigate to the event. |
|
Transfer Balance Cap Commutation Letter and Minute |
Transfer Balance Cap Commutation Letter and Minute have been made available to comply with ATO Practical Compliance Guideline (PCG 2017/5) for commutation requests made by SMSF members to the SMSF trustees before 1 July 2017 to avoid exceeding the $1.6 million transfer balance cap. |
|
Unique identifier for pension accounts |
An unique identifier for each pension is available in the pension establishment screen to comply with the TBAR requirement. |
|
Transfer balance account report (TBAR) |
An additional field has been added in Pension Establishment and Pension Commutation event. |
|
Special value for capped defined income streams |
An additional field has been added to allow users to manually record the special value as at 30 June 2017 of capped defined income streams, e.g. market-linked pensions and lifetime pensions for TBAR reporting. For more information refer to Transfer balance cap - calculating the special value of a capped defined benefit income stream. |
|
TBAR lodgment console |
An additional console has been added to the Business level menu to prepare the file required to be lodged to the ATO through the Bulk Data Exchange facility on the Tax Agent Portal. You may also use this console to identify TBAR records based on different filters and keep track of the TBAR lodgment obligations. |
|
TBAR declaration |
An additional report has been added to allow the SMSF trustees to give permission to a registered tax agent to lodge TBAR records on behalf of the fund to the ATO through the Tax Agent Portal electronically. It can also be used for record keeping purposes to capture the details of TBAR records lodged to the ATO. |
|
Fund level TBAR console |
Class users can use the TBAR Console to identify and keep track of the TBAR lodgment obligations for a selected fund. |
|
Track transfer balance account |
Class uses can keep track of a member's transfer balance and unused transfer balance cap via the transfer balance account screen. |
Further reading:
- ATO Website: Transfer balance cap
- ATO Website: Child recipients of a death benefit income stream
- Law Companion Guidelines (Final): LCG 2016/8: Superannuation reform: transfer balance cap and transition-to-retirement reforms: transitional CGT relief for superannuation funds
- Law Companion Guidelines (Final): LCR 2016/9 Superannuation reform: transfer balance cap
- Practical Compliance Guideline (Final): PCG 2017/5: Superannuation reform: commutation requests made before 1 July 2017 to avoid exceeding the $1.6 million transfer balance cap
- Practical Compliance Guideline (Final): PCG 2017/6: Superannuation reform: commutation of a death benefit income stream before 1 July 2017
- Guidance Note 1: New transfer balance cap for retirement phase accounts
- Guidance Note 15: Excess transfer balance
- Guidance Note 16: Transfer balance account – credits and debits