The ATO has highlighted the potential impact of the new transfer balance cap (TBC) debit on some SMSF members after changes were introduced into superannuation legislation late last year.
In an update on its website, the regulator stated amendments made to superannuation laws in December, which introduced a new type of debit in some transfer balance accounts (TBA), might affect some SMSF members receiving a defined benefit lifetime pension.
“The debit should not create new reporting obligations for SMSFs as it is only expected to arise in limited circumstances if the individual is receiving certain defined benefit pensions from Australian Prudential Regulation Authority-regulated funds,” the ATO noted.
“However, the new debit may impact an SMSF member’s transfer balance account.”
The regulator pointed out the TBA debit would arise if a member received a prescribed defined benefit lifetime pension or annuity and the value of the pension or annuity was reduced due to a change in the circumstances of that member.
“For example, a reversionary lifetime defined benefit pension is paid to a surviving spouse where the first payment is equal to the full amount of the payment that was made to the deceased,” it said.
“Under the terms of the rules of the fund, the second and all subsequent pension payments are reduced.”
It also said a debit might arise at the time the pension payment was reduced.
“The Treasury Laws Amendment (Miscellaneous Amendments) Regulations 2019 is retrospective and will capture debits that arose in an individual’s balance account from 1 July 2017,” it added.
It urged members who believed they might be entitled to a debit under the new rules to contact their pension or annuity fund.
In October last year, legal firm SuperCentral warned trustees to be fully aware that not all transactions to a pension in retirement phase within an SMSF would be considered as transfer balance debits and would therefore be unable to reduce any excess in a TBA.