Aware Super Logo

Home

Total super balance

How is superannuation balance calculated?

Section: 8.2

A members total superannuation balance is calculated at a particular time by:

  • adding together
    • the accumulation phase value of their superannuation interests not in the retirement phase - this is the total amount of benefits that would become payable if they voluntarily ceased the interest at the time.
    • the retirement phase value of their superannuation interests - this is the balance of a transfer balance account, modified to reflect the value of account-based interests in the retirement phase at that time and disregarding certain debits.
    • any roll-over superannuation benefits which are not reflected in accumulation phase value (rollovers in transit between super funds on 30 June)
    • certain amounts under limited recourse borrowing arrangements (LRBA) - from 1 July 2018, if either:
      • the LRBA is with an associate of the fund
      • they have satisfied a condition of release with a nil cashing restrictions
  • subtracting any personal injury or structural settlement contributions that have been paid into their super funds.

Accumulation phase value

The first component of a member's total superannuation balance is the accumulation phase value of a superannuation interests that are not in the retirement phase. A superannuation interest will be in retirement phase if it supports a superannuation  income stream that is in the retirement phase at that time. This will be the case if the interest:

  • supports a superannuation income stream where a superannuation income stream benefit is currently payable from it
  • if it is a deferred superannuation income stream that has not yet become payable but the member has met a relevant condition of release (such as retirement, terminal medical condition, permanent incapacity, or attaining age 65), or
  • if it is a transition to retirement income stream, transition to retirement income pension, non-commutable allocated annuity or a non-commutable allocated pension (collectively known as TRIS), when the person receiving the TRIS:
    • is 65 years old or older
    • has met a relevant condition of release with a nil cashing restriction (retirement, terminal medical condition, permanent incapacity) and
    • they have notified the superannuation provider for the TRIS of that fact, or
    • is a reversionary beneficiary

There are certain income streams excluded from the retirement phase, either because the law specifically excludes the superannuation income stream from being in the retirement phase or because the superannuation income stream fails to meet the definition of a superannuation income in the retirement phase. The following superannuation income streams are excluded from being in retirement phase and are therefore in accumulation phase:

  • a deferred superannuation income stream that has not yet become payable and the member has not yet met a relevant condition of release is included in the accumulation phase value. For instance of the member purchased a deferred superannuation income stream before meeting a relevant condition of release it will form part of the accumulation phase value until they meet a relevant condition of release or it starts to become payable.
  • a TRIs when the person to who the benefit is payable is not a reversionary beneficiary, and
    • is under 65 years of age, or
    • has not met a relevant condition of release with a nil cashing restriction (retirement, terminal medical condition, permanent incapacity), or
    • they have met a relevant condition of release with a nil cashing restriction (retirement, terminal medical condition, permanent incapacity) but have not notified the superannuation provider for the TRIS of that fact.
  • a superannuation income streams that stop being in the retirement phase

Retirement phase value

A member's retirement phase value (RPV) is the balance of their transfer balance account (generally, the commencement value of a superannuation pension). The RPV is worked out at the end of 30 June, with modifications if member has either:

  • a certain account-based super income streams or streams
  • made a structured settlement contributions to their super fund

Account based income streams

For the purpose of calculating a total superannuation balance, the transfer balance is modified if a credit has arise in their transfer balance account in regards to the following prescribed account-based superannuation income streams:

  • allocated annuities
  • allocated pensions
  • account-based annuities
  • account-based pensions
  • market linked annuities
  • market linked pensions

The transfer balance is modified by disregarding certain debits and credits that have arisen in the transfer balance account in respect of these prescribed account-based superannuation income streams. In practice, disregarding certain credits and debits means that the credits are subtracted from, and the debits are added back to, the transfer balance.

The following credits and debits arise in a transfer balance account are disregarded:

  • Credits that have arisen from
    • the member becomes a retirement phase recipient of the prescribed account-based superannuation income stream
  • Debits have arisen from
    • commutations of the prescribed account-based superannuation income stream in the retirement phase
    • an event that results in the superannuation interest that supports the prescribed account-based superannuation income stream being reduced (fraud or dishonesty; bankruptcy)
    • a payment split that applies to the prescribed account-based superannuation income stream (divorce or relationship breakdown)
    • a superannuation income stream provider failing to comply with a commutation authority in respect of the prescribed account-based superannuation income stream
    • a prescribed account-based superannuation income stream that fails to comply with the relevant pension  or annuity standards.

The following credit and debits that have arisen in their transfer balance account are not disregarded:

  • Credits that have arisen from
    • excess transfer balance earnings
  • Debits that have arisen from
    • structured settlement contributions
    • a notice issued under section 136-70 of Schedule 1 of the Taxation Administration Act 1953 of non-commutable excess transfer balance

The transfer balance is then increased by the total amount of superannuation benefits that would become payable if the member had the right to and they voluntarily caused the superannuation interest that supports the prescribed account-based superannuation income stream to cease at the time. This would equate to the superannuation lump sum that a member could be paid at that time from that superannuation interest.

Example 1: Account based pension and defined benefit lifetime pension

Shane commenced both an account-based pension ($500,000) and a defined benefit lifetime pension ($500,000) on 1 December 2017. He has no remaining superannuation interests in accumulation phase. Shane's transfer balance account commenced on 1 December 2017.

At the end of 30 June 2018, the amount that would be paid to Shane if he voluntarily ceased the account-based pension is $400,000.

Shane's total superannuation balance at the end of 30 June 2018 is the sum of

Steps 1, 2, 3 and 4 reduced by Step 5.

Step 1 - Accumulation phase value = $0

Step 2 - Modified transfer balance

Shane's transfer balance at the end of 30 June 2018 is $1,000,000:

    Credit Balance
1 Dec 2017 Account-based pension $500,000 $500,000
1 Dec 2017 Defined benefit lifetime pension $500,000 $1,000,000
  1. Disregard the amount of the credit that has arisen in respect of the account-based pension ($500,000)
  2. Increase the balance by the amount that would become payable if the account-based pension was voluntarily ceased at the end of 30 June 2018 ($400,000)

The credit to Shane's transfer balance account relevant to his defined benefit lifetime pension is not disregarded.

Modified transfer balance is $1,000,000 - $500,000 + $400,000 = $900,000.

Step 3 - Rollover superannuation benefits = $0

Step 4 - LRBA amounts  = $0

Step 5 - Structured settlements contributions  = $0

Shane's total superannuation balance at the end of 30 June 2018 is $900,000

Structured settlement contributions

If a member made a structured settlement contribution, a further modification is made to their transfer balance by disregarding the debit that has arisen in their transfer balance account in respect of the structured settlement contribution. This modification applies to both account-based and non-account based income streams.

Example - Structured settlement contribution

On 12 October 2018 Jack is awarded a structured settlement of $1,800,000. He contributes this payment to his existing accumulation phase interest of $200,000 in his superannuation fund which brings the balance of that interest to $2,000,000.

On 30 November 2018 Jack commences an account-based pension of $1,800,000. At the end of 30 June 2019, the amount that would be paid to Jack if he voluntarily ceased his account-based pension is $1,650,000.

At the end of 30 June 2019 the amount that would be payable to Jack from his accumulation phase interest if he were to voluntarily cease the interest is $250,000 (increased as a result of earnings).

Jack's total superannuation balance at the end of 30 June 2019 is the sum of

Steps 1, 2, 3 and 4 reduced by Step 5.

Step 1 - Accumulation phase value

Value of Jack's superannuation interest that is not in retirement phase = $250,000

Step 2 - Modified transfer balance

Jack's transfer balance account at the end of 30 June 2019 is $0.

    Credit Debit Balance
30 Nov 2018 Account-based pension $1,800,000   $1,800,000
30 Nov 2018 Structured settlement contributions   $1,800,000 $0

Disregard the amount of the credit that has arisen in respect of the

account-based pension ($1,800,000).

(b) The debit arising from the structured settlement contribution is not disregarded.

(c) Increase the balance by the amount that would become payable if the account-based pension voluntarily ceased at the end of 30 June 2019 ($1,650,000).

Transfer balance (modified for account-based pension) is $0 - $1,800,000 + $1,650,000= -$150,000.

Further modification of transfer balance for structured settlement

(d) Disregard debit arising from the structured settlement contribution

Modified transfer balance is -$150,000 + $1,800,000 = $1,650,000

Step 3 - Rollover superannuation benefits = $0

Step 4 - LRBA amounts = $0

Step 5 - Structured settlement contributions = $1,800,000

Jack's total superannuation balance at the end of 30 June 2019 is $100,000.

Roll-over superannuation benefits

A roll-over superannuation benefit is included in the total superannuation balance at a particular time if it is:

  • paid at or before that time, and
  • received after that time by:
    • the complying superannuation plan, or
    • the entity from which the superannuation annuity is being purchase and
  • is not reflected in the accumulation phase value or their transfer balance
Example - Roll-over superannuation benefit

Mary has $200,000 in the accumulation phase in her superannuation fund. Mary requests Fund A to roll-over $10,000 from Fund A to Fund B on 29 June 2019. It is received by Fund B on 1 July 2019.

Mary's total superannuation balance at the end of 30 June 2019 is the sum of Steps 1, 2, 3 and 4 reduced by Step 5.

Step 1 - Accumulation phase value

Mary's roll-over superannuation benefit is not included in the accumulation phase value of her superannuation interests in Fund A or Fund B at the end of 30 June 2019.

Value of Mary's superannuation interest not in retirement phase = $190,000.

Step 2 - Transfer balance = $0

Step 3 - Rollover superannuation benefits

Roll-over superannuation benefit not reflected in accumulation phase value or transfer balance = $10,000.

Step 4 - LRBA amounts = $0

Step 5 - Structured settlement contributions = $0

Mary's total superannuation balance at the end of 30 June 2019 is $200,000.

Limited recourse borrowing arrangements

From 1 July 2018, SMSFs that start a limited recourse borrowing arrangement (LRBA) must include the outstanding limited borrowing arrangement amount at 30 June each income year when specific criteria are met.

The outstanding balance of a relevant LRBA at 30 June will be reported in the member information section of the SMSF annual return and included in the member's total super balance.

Reporting of the outstanding balance of a relevant LRBA is required if either of the following applies:

  • the LRBA is between the fund and an associate of the fund
  • the member has met a condition of release with a nil cashing restriction

If the fund has an impacted LRBA and a member has met either of the above criteria, the fund must report the outstanding LRBA amount in that member's section of the SMSF annual return.

Example - LRBA amount - condition of release with nil cashing restriction

Harry and Beth are members of their SMSF, the H&B Superannuation Fund. Harry is aged 65 years and Beth is aged 60 years. They have not commenced any superannuation income streams from their SMSF. Neither Harry nor Beth holds an interest in any other superannuation fund.

As at 28 June 2019, Harry's balance in the SMSF is $600,000 and Beth's balance is $400,000. These balances are held in cash.

On 29 June 2019, the SMSF enters into an LRBA covered by subsection 67A(1) of the SISA with a commercial lender to borrow $1,000,000. It uses the $1,000,000 it borrows together with $500,000 that it held in cash to purchase a commercial property for $1,500,000.

Of the $500,000 cash used to purchase the commercial property, 60% ($300,000) was supporting Harry's superannuation interest and the other 40% ($200,000) was supporting Beth's superannuation interest. These percentages also reflect the extent to which the commercial property supports Harry and Beth's superannuation interests.

At the end of 30 June 2019, the SMSF has total assets of $2,000,000 made up of the market value of the commercial property of $1,500,000 and $500,000 in cash. The SMSF also has a liability of $1,000,000.

Harry's total superannuation balance at the end of 30 June 2019 is the sum of Steps 1, 2, 3 and 4 reduced by Step 5.

Step 1 - Accumulation phase value

Value of Harry's superannuation interest that is not in retirement phase is $600,000 (made up of $300,000 cash and $300,000, being 60% of the net value of the property)

Step 2 - Transfer balance = $0

Step 3 - Rollover superannuation benefits = $0

Step 4 - LRBA amounts= $600,000

As Harry is aged 65 years, he has met a relevant condition of release with a nil cashing restriction.41A His total superannuation balance will include an LRBA amount. The value of Harry's LRBA amount is $600,000 which is 60% of the value of the outstanding balance of the LRBA of $1,000,000.

Step 5 - Structured settlement contributions = $0

Harry's total superannuation balance at the end of 30 June 2019 is $1,200,000.

Beth's total superannuation balance at the end of 30 June 2019 is the sum of

Steps 1, 2, 3 and 4 reduced by Step 5.

Step 1 - Accumulation phase value

Value of Beth's superannuation interest that is not in retirement phase is $400,000 (made up of $200,000 cash and $200,000, being 40% of net value of property)

Step 2 - Transfer balance = $0

Step 3 - Rollover superannuation benefits = $0

Step 4 - LRBA amounts = $0

There is no LRBA amount to be included as Beth does not satisfy a relevant condition of release with a nil cashing restriction, nor is the lender an associate of the superannuation fund.

Step 5 - Structured settlement contributions = $0

Beth's total superannuation balance at the end of 30 June 2019 is $400,000.

Source: LCR 2016/2 Superannuation reform: Total superannuation balance

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

Last modified: Thursday, September 24, 2020