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Transfer Balance Account Reporting (TBAR) amendments

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Published on 29 Mar 19 by THE TAX INSTITUTE

In general, retirees face a $1.6 million cap on the amount they can use to purchase a tax-free superannuation pension. Existing retirement pension balances on 1 July 2017 (being the date TBAR was introduced) also count towards that cap.

The transfer balance account is maintained to keep track of the remaining cap space for the retiree, with:

  • a credit arising when a member starts to receive a pension in retirement phase, and on 1 July 2017 for existing pensions in retirement phase; and
  • a debit arising when a member receives a lump sum in part or full commutation of the pension.
  • In recognition that it is difficult to bring the value of some pensions down to the cap, additional cap space is provided to allow for the full credit value of:
  • defined benefit lifetime pensions; and
  • life expectancy pensions and account-based market-linked pensions that were already in existence in retirement phase on 1 July 2017.

These types of pensions were (in the most part) not account-based, so special values were used to work out the credit. For whatever reason, a special value was also used for the 1 July 2017 value of account-based market-linked pensions.

Unfortunately, the interaction of the credit and later debit upon commutation did not always produce sensible outcomes. The Bill and Regulations are intended to rectify the position for account-based market-linked pensions and in some other situations.

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THE TAX INSTITUTE
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