Total Superannuation Balance Thresholds

The Total Superannuation Balance (TSB) is one of the most important new concepts introduced as part of the major superannuation changes which took effect from 1 July 2017.

The TSB is a way to value your total super interests on a given date by adding together the following:

• the accumulation phase value of your super interests that are not in the retirement phase
• if you have one or more super income streams in the retirement phase, your ‘transfer balance’ or your ‘modified transfer balance’. This is the purchase price or cost base of the income stream
• the amount of any rollover superannuation benefit not already reflected in the accumulation phase value of your super interests or your transfer balance (that is, rollovers in transit between super funds on 30 June)

From this, you then subtract any personal injury or structured settlement contributions that have been paid into your super fund(s).

The TSB is then used to work out your eligibility for:

• the unused concessional contributions cap carry-forward
• the non-concessional contributions cap and the two- or three-year bring-forward period
• the government co-contribution
• the tax offset for spouse contributions

Perhaps the easiest way to think about this however is by the value of the TSB, as the value may either prohibit you from making contributions, change the reporting requirements of Self-Managed Superannuation Funds (SMSFs) or change the tax treatment of certain SMSFs.

Eligibility for the five-year carry forward of unused concessional contributions cap

If an individual’s total superannuation balance just before the start of the relevant financial year is less than $500,000, they may be able to access an increased concessional contributions cap where the individual has not fully utilised their concessional cap for one or more of the previous five financial years, effective from 1 July 2018.

It should be noted that the $500,000 figure is not subject to indexation.

Self managed superannuation fund event-based reporting

All super funds are required to lodge a Transfer Balance Account Report (TBAR), which reports to the Tax Office that certain events, such as starting a pension, have occurred.

Via an administrative concession, the TBAR reporting frequency that applies to SMSFs depends on the TSB of the fund members.

SMSFs that only have members with a TSB of less than $1,000,000 report events at the same time that the SMSF lodges its annual return, which is usually 15 May of the following year.

It should be noted that the $1,000,000 TSB threshold for TBAR is not subject to indexation, and an SMSF’s reporting frequency does not change once it has been locked in to a particular reporting cycle.

Self managed superannuation fund event-based reporting

All super funds are required to lodge a Transfer Balance Account Report (TBAR), which reports to the Tax Office that certain events, such as starting a pension, have occurred.

Via an administrative concession, the TBAR reporting frequency that applies to SMSFs depends on the TSB of the fund members.

SMSFs that have at least one member with a TSB of $1,000,000 or more will be required to report events impacting their members’ TBA within 28 days after the end of the quarter in which the event occurs

It should be noted that the $1,000,000 TSB threshold for TBAR is not subject to indexation, and an SMSF’s reporting frequency does not change once it has been locked in to a particular reporting cycle.

Bring forward of an individual’s non-concessional contributions cap

Individuals under age 65 are eligible to “bring forward” there Non-Concessional Contributions (NCCs), subject to the value of their TSB immediately before the start of the first year.

TSB under $1,300,000

The individual is able to make an NCC of $300,000, in lieu of making $100,000 per annum for three years.

TSB under $1,400,000

The individual is able to make an NCC of $200,000, in lieu of making $100,000 per annum for two years.

TSB under $1,500,000    

The individual is able to make an NCC of $100,000

This is because the difference between the general Transfer Balance Cap (TBC) and the individual’s TSB at the test time must exceed an amount equal to twice the annual NCC cap.

This is subject to indexation due to the general indexation rules that apply to the general TBC and annual NCC cap.

Disregarded small fund assets

Where the TSB exceeds $1,600,000 just before the start of the income year for an SMSF where at least one member is in retirement phase, the SMSF is precluded from using the segregated method to claim except. An actuarial certificate must be obtained.

It should be noted that this $1,600,000 threshold is not subject to indexation.

Making a non-concessional contribution without excess

In order to have an NCC cap greater than “Nil” for an income year, an individual must not have a TSB equal to or exceeding the general TBC immediately before the start of the FY of the contribution.

Accordingly, if an individual’s TSB is greater than $1,600,000 at the start of the financial year, any NCC made will be deemed excessive.

Offset for spouse contribution

An individual is not entitled to a tax offset for an income year if, immediately before the start of the financial year of the contribution, their spouse’s TSB equals or exceeds the general TBC.

It should be noted that the $1,600,000 threshold is subject to indexation due to the general indexation rules that apply to the general TBC.

Government co-contribution for low-income earners

Immediately before the start of that FY, the individual’s TSB is less than the general TBC for that FY

It should be noted that the $1,600,000 threshold is subject to indexation due to the general indexation rules that apply to the general TBC.

If you would like to know more about the total superannuation balance thresholds, please contact Brett Griffiths our Superannuation Advisory Director for assistance.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.