Total Superannuation Balance: When it applies and what is included

The definition introduces two new concepts – accumulation phase value and retirement phase value or APV and RPV.

If you’re still in accumulation phase, your APV is relatively easy to calculate. It’s the amount that would be payable if you were to receive your superannuation today or the withdrawal or rollover value. You can find it out by contacting your superannuation fund or if you’re able to logon to your account it’s the amount often labelled as “if you take your super today”.

If you have an SMSF, your administrator or accountant should keep a track of this value.

APV also includes deferred superannuation income streams, transition to retirement income streams and superannuation income streams that do not comply with the pension or annuity standards

The ATO calculates RPV using your transfer balance account as at the end of the previous financial year. To recap, your transfer balance account is a record of all the events that count towards your transfer balance cap. And your transfer balance cap is the total amount that can be kept in a tax-free retirement phase account – currently $1.6 million.

For TSB purposes account-based super income streams need to have their value adjusted to be included in retirement phase value at their current value. Modifications to the transfer balance amount may also be needed if there are structured settlement contributions to the superannuation fund.

What is the Total Superannuation Balance used for?

TSB is used to measure your eligibility for a number of important superannuation measures. These are:

• The unused concessional contributions cap carry-forward
• The non-concessional contributions cap and eligibility for the bring forward of your non-concessional contributions cap
• Government co-contributions
• The tax offset for spouse contributions.
• For SMSFs and small APRA funds your members’ TSB determines whether or not you can use the segregated method to calculate exempt current pension income (ECPI).

Concessional contributions carry forward

Since 1 July 2018, you are able to carry forward any unused concessional contribution cap amounts for five years as long as your superannuation balance in the previous financial year is under $500,000. The first year in which you can increase your concessional contributions cap by the unused amount is 2019–20.

Non-concessional contributions cap and non-concessional contributions cap bring forward

The non-concessional contribution cap is $100,000 a year if your total superannuation balance in the previous financial year is less than or equal to $1.6 million.

If you are under age 65 you are able to access the bring-forward rule which allows you to bring forward three years of non-concessional contributions i.e. currently a cap of $300,000. To access one year of bring forward – i.e. a total $200,000 you have a total superannuation limit of between $1.4 million and $1.5 million. To access the total bring forward non-concessional contribution of $300,000 your total superannuation limit needs to be under $1.4 million,

Government co-contributions

You also have a TSB limit equivalent to the balance transfer cap to meet one of the eligibility criteria for the government’s co-contribution superannuation scheme, whereby the government will match after-tax superannuation contributions up to an amount of $500 per year if you also meet certain income eligibility requirements.

Tax offset for spouse contributions

If you make superannuation contributions on behalf of your spouse of at least $3,000 you may be eligible for a tax offset of up to $540. Your spouse’s TSB must be under the balance transfer cap level immediately before the start of the financial year in which the contribution was made.

SMSFs and Exempt Current Pension Income (ECPI)

SMSFs with more than one member and where one or more of those members are in retirement phase need to calculate ECPI each year. The segregated method can be used if the assets supporting the pension are known and are separated from the assets in accumulation phase.

However, if any fund member has a total superannuation balance over $1.6 million (equivalent to the transfer balance cap level) immediately before the start of the relevant income year and is receiving a retirement phase income stream from any source (including the SMSF or another super provider), the SMSF cannot use the segregated method and must use the proportionate method to calculate ECPI. The proportionate method requires an actuarial certificate to determine which proportion of the SMSF’s total assets is supporting the pension.

What’s the different between the total superannuation balance and the transfer balance cap?

TSB is the total of your superannuation interests in both accumulation and retirement phase. It is used to determine your eligibility for certain superannuation measures during accumulation phase and, in retirement, to determine whether or not you have reached your transfer balance cap.

The total superannuation limit is the maximum amount you can have in superannuation to be eligible for certain superannuation measures in accumulation phase. It is equivalent to the transfer balance cap for many measures but not all.

The ATO uses the following example to highlight the differences and how they are used.

As of 1 April 2017, Fred is receiving an account-based pension valued at $2 million. On 28 June 2017, Fred commutes $500,000 from his pension and transfers it back into his accumulation account.

He then makes a $50,000 non-concessional contribution to his accumulation account in August 2017. His transfer balance account is $1.5 million so he does not breach the $1.6 million balance transfer cap for 2017-18.

But his total superannuation as at 30 June 2017 was $2 million (the sum of $500,000 in accumulation and $1.5 million in his transfer balance account) which breaches the total superannuation limit to make him eligible for making non-concessional contributions to his superannuation fund, therefore his $50,000 contribution will be treated as an excess non-concessional contribution.

How do I calculate or check my total super balance?

If you are in retirement phase, your TSB is on your transfer balance account, which you can access via the myGov website.

If you are in accumulation phase your superannuation fund can tell you your TSB (remember to add all the values if you have multiple superannuation funds). And if you have an SMSF, your platform administrator should keep a tally of the amount on your account.

Remember that your total superannuation balance is the sum of your accumulation phase value and your retirement phase value if you have both.

Total superannuation balance reporting

Currently totally superannuation balance reporting is done annually via the members contribution statement (MCS) for APRA funds or an SMSF annual return for SMSF members.

If the amount reported on the MCS does not accurately reflect the accumulation phase value (APV) or retirement phase value (RPV) funds can report the new amount to the ATO via the transfer balance account report (TBAR). This information would then override the MCS or the SMSF annual return for TSB purposes only.

The ATO has asked that these TBAR notifications be lodged before or with the MCS or SMSF annual return and has said that the additional reporting is optional and at the discretion of funds.

For SMSFs the closing account balance on the SMSF annual return is often greater than the APV or the RPV because it does not include the disposal costs required to cease an investment interest.

The ATO says that additional reporting is required for SMSFs when the inclusion of these asset disposal costs would result in a TSB above one of the thresholds that limit eligibility for certain superannuation measures.

Also, when SMSF members have a capped defined benefit incomes stream and either an accumulation interest or a market-linked retirement phase interest in the SMSF, if they need to submit a TBAR they need to provide one for every account they have in the SMSF.

An SMSF member’s TSB is also used to determine how frequently an SMSF needs to report transfer balance events. For TSB’s less than $1 million this means they should only have to report transfer balance events annually (refer to our article on transfer balance reporting for what needs to be reported).

Another ATO example illustrates this. On the last day of the 2017/18 financial year, Mary has a superannuation balance of $1.2 million. In September 2018 she starts an income stream valued at $1.2 million. Over time the value of the income stream decreases to $800,000. On 3 March 2019 Mary commutes $100,000 from the pension.

As her TSB was more than $1 million at the end of the financial year prior to her starting a retirement phase income stream, the SMSF is required to report any transfer balance events 28 days after the end of the quarter in which they occurred. This means the income stream would need to be reported to the ATO by the 28 October and the commutation by the 28 April 2019.