Retirement
How does the pension transfer balance cap actually affect me?
What does the pension transfer balance cap mean for new and current account-based pensions and transition to retirement pensions?
How does the pension transfer balance cap actually affect me?
What does the pension transfer balance cap mean for new and current account-based pensions and transition to retirement pensions?

What happens to new pensions?
If a pension commences on or after 1 July 2017, the super fund paying the pension will notify the ATO that the pension has commenced and the initial balance of the pension. The ATO will create a transfer balance account for the taxpayer and credit the initial balance of the pension to the account. If the credit amount exceeds the transfer balance cap, the ATO will advise the fund of the excess portion and the fund will have to commute the excess portion and either transfer the commuted portion into accumulation phase or pay out the excess portion as a lump sum benefit (provided the member has met a condition of release). The ATO will also issue an assessment for excess transfer balance tax (taxed at 15 per cent).
If the taxpayer commences a second pension, the second pension initial account balance will be notified to the ATO and the same process will be repeated.
What happens to current pensions?

In relation to a current pension (i.e. a pension which commenced before 1 July 2017 and remains on foot after 30 June 2017), the paying fund will have to notify the ATO of the pension account balance at 30 June 2017, and the ATO will open a transfer balance account for the taxpayer and credit the 30 June 2017 balance to the transfer account.
The ATO will then determine the extent, if any, the pension is excessive and, if so, notify the fund paying the pension. The excessive portion must be commuted and transferred to either accumulation phase or paid as a superannuation lump sum. Excess transfer balance tax will then be imposed to claw back the earnings tax exemption which has applied since 1 July 2017 on the excessive portion.
What about transition to retirement pensions?
From 1 July 2017, these pensions will no longer be entitled to the earnings tax exemption. Consequently, while these pensions remain in the ‘transition’ phase the pension transfer cap is not relevant.
However, as soon as the transition phase ceases (because the taxpayer has attained age 65 or has retired), the pension is now an ordinary account-based pension and the trustee paying the pension will have to report to the ATO the date the transition phase ceased and the pension account balance at that date. From that point, the earnings tax exemption will apply.
In summary:
• Transition to retirement pension commenced before 1 July 2017 then:
• If the transition phase ceases before 1 July 2017, the pension will be an ordinary account-based pension at 1 July 2017 and the account balance at 30 June 2017 must be reported to the ATO; and
• If the transition phase ceases on or after 1 July 2017 – say for example on 30 September 2017 when the taxpayer attains age 60 – the pension will be an ordinary account-based pension on 30 September 2017 and the pension balance account at 30 September 2017 must be reported to the ATO.
• Transition to retirement pension commenced after 30 June 2017 then:
• At the time the transition to retirement pension commences, as the pension is not entitled to the earnings tax exemption, it is not required to be reported; and
• At the time the transition to retirement pension ceases – say on the retirement of the taxpayer on 31 December 2017 – then the pension will be an ordinary account-based pension on 31 December 2017 and the pension balance at 31 December 2017 must be reported to the ATO.
Julie Hartley, solicitor, Townsends Business & Corporate Lawyers

Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more

Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more

Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more

Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more

Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more

Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more

Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more

Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more

Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more

Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more

Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more

Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more

Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more

Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more

Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more

Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more