How do different types of death benefit income streams impact your transfer balance cap?

From 1 July 2017, any amounts transferred into retirement phase will be measured against a transfer balance cap, which is currently $1.6 million for 2017/2018 financial year. This means any death benefit income stream a member is entitled to, will give rise to a credit in their transfer balance account (TBA).

The total amount and the timing of credit to the member’s transfer balance account will depend on the types of death benefit income streams and their commencement date.

Below is a brief summary based on the Australian Taxation Office’s publication — Law Companion Ruling 2017/3 (LCR 2017/3).

If a superannuation fund member is entitled to the death benefit income streams prior to 1 July 2017:

 Reversionary pensionDeath benefit pension
Credit amountValue of the deceased’s income stream on 30 June 2017Value of the deceased’s income stream on 30 June 2017
Timing of the credit in TBAThe later of:
- 1 July 2017; or
- 12 months after the date of the member’s death
1 July 2017

If a superannuation fund member is entitled to the death benefit income streams on or after 1 July 2017:

 Reversionary pensionDeath benefit pension
Starting dayDate of the member’s deathCommencement of death benefit pension
Timing of the credit in TBA12 months after the date of the member’s deathNo 12-month grace period; the date the death benefit pension is paid to the deceased’s dependent
Credit amountValue on the 'starting day' (value of the income stream as at the date of the member’s death)Value on the 'starting day' (value of the income stream on the day the death benefit pension is paid)

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DISCLAIMER: This information is an interpretation of rules, regulations and standards. It should not be considered as general or specific advice and neither purports, nor is intended to be advice on any particular matter. No responsibility can be accepted for those who act on the contents of this publication without first obtaining specific advice. Liability limited by a scheme approved under Professional Standards Legislation.