TSB can be reduced via tax law

TSB total superannuation balance reduction

SMSF members concerned about the proposed $3 million earnings tax can use additional book-keeping steps to reduce the total super balance that appears in their member statements.

The government’s proposed $3 million earnings tax has focused attention on how a superannuation fund member’s total super balance (TSB) is calculated, but a few additional book-keeping steps can result in a lower figure, according to an SMSF technical expert.

Heffron SMSF technical and education services director Leigh Mansell said while the TSB is calculated using a member’s accumulation accounts, account-based pensions and transition-to-retirement pensions, that number is drawn from a fund’s balance sheet, but can be adjusted using off-balance-sheet entries.

“When we work out somebody’s TSB, the tax law says the total value of all accounts is what we call the termination value, which means what that person would get in their pocket if they left the fund on a particular 30 June,” Mansell said during the recent Heffron Superannuation Intensive Day.

“Where do we normally get those numbers from? It’s off the balance sheet after you do the financial statements and give a proportionate share of that balance sheet to each member.

“Now, some practitioners may already be doing tax-effective accounting and accruing for deferred tax liabilities in the statement of financial position, which can suppress a TSB, but you are also allowed to do off-balance-sheet entries.”

She said these entries could be used to account for deferred tax or termination costs on investments, or other related costs.

“If we sold something, such as property, would there be any agent’s fees? Would there be any brokerage? Would there be any other additional costs?” she said.

“When selling a property you’re not allowed to account for those when you’re putting the financial statements together, but when working out the TSB you can do those off-balance-sheet calculations and adjust what you get off your balance sheet to reduce that TSB.

“Most people just go with whatever is on their member statement, which feeds off the financial statements, but the tax law lets you use termination value and it lets you use off-balance-sheet transactions, but you would need to have supporting evidence to prove where you got those numbers from.”

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