Government to amend TBC to prevent adverse merger impacts

26 October 2023
| By Laura Dew |
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The government has announced it is taking steps to amend the transfer balance cap (TBC) to prevent members from being adversely impacted by super fund mergers.

This will affect the TBC of individuals who have a capped defined benefit income stream to ensure they are not adversely impacted in the event of a merger or successor fund transfer (SFT).

In its current form, a member’s TBC may be unintentionally impacted due to the original income stream being treated as ceasing and new one beginning.

Minister for financial services, Stephen Jones, said: “This means a new valuation of the capped defined benefit income stream is required which can result in a higher valuation for the transfer balance cap and lead to adverse outcomes for some members.

“The government will ensure that members receiving an income stream prior to a merger or successor fund transfer will continue to receive their income stream without unintentionally impacting the transfer balance cap.”

The amendments will apply retrospectively from 1 July 2017.

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Laura, I'm one of the impacted Defined Benefit members, belonging to BTFM, which has now moved to Mercer, via a SFT. This resulted in ending up breaching my TBC, I have now moved funds to from my SMSF Pension Acct to Accumulation Account in order to maintain my TBC. Where can I find out more about this amendment and so that I can proceed accordingly, as Im about to file my Tax Return for my SMSF Thanking you in advance Eraj Gihan Ratnayake [email protected]

What a relief to defined benefit income stream pension members who had their Special Value (defined benefit pension) recalculated when the fund is involved in Successor Fund Transfer (pension members have no say to move or not to move). Any idea when the legislation will be changed? The recent sale of BT to Mercer in April 2023 had resulted in Westpac defined benefit pension members their TBC accounts exceeded their TBC caps.

Yes, to one of my clients whose partner had died in October 2021, a calculation was done on 1 July 2022 with his and her reversionary pension account values. His TBC had been reduced by approx. $150,000 from a past benefit received (which was factually wrong), and by November 2022, Tax Office ordered that $78,000 be cashed out of his retirement system, after the investment markets had dropped and total current value was $1.52 million in November 2022, well below TBC of $1.7 million. Because this was set in Legislation, Trustees would do nothing and the Trustees cashed out the $78,000. The whole event was logically regressive, all based on 1 calculation on the '1 July' date and ignored all current realities (November 2022 valuations). Treasury thinks it's causing more taxes but his children spent it on conspicuous consumption. His failure was his wife died before him. The superannuation system should have actuaries forecasting the costs of nursing homes in the last 5 years of life is highly costly, which can be self-funded instead of being reliant on Government Social Security. I hope the Senate Economic References Committee reads this comment?

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