TBC and TSB
Transfer Balance Cap
The Transfer Balance Cap ie the amount that can be moved into pension mode that enjoys tax free earnings on assets backing
the pension. Amount in pension mode at 1/7/2017 in excess of the cap must be commuted back to accumulation mode.
Capped defined benefit income streams have modified rules for the transfer balance cap; total superannuation balance and
taxation of pension payments.
The special value of capped defined benefit income streams is:
| Capped defined benefit income stream |
Must meet SIS regulation |
Special value of TBC |
| Lifetime pension commenced at any time |
1.06(2) |
Annual entitlement x 16 |
| Life expectancy pensions commenced prior to 1/7/2017 |
1.06(7) |
Annual entitlement x remaining term |
| Market linked pension commenced prior to 1/7/2017 |
1.06(8) |
Annual entitlement x remaining term |
After 1 July 2017 the only capped defined benefit income streams that can be commenced are non-commutable lifetime pensions.
The annual income entitlement = first payment to the individual is entitled to receive after the valuation is required
divided by the number of days in the period relating to the payment times 365.
The number of years in the remaining term is rounded up.
When a capped defined benefit income stream is fully or partially commuted, the debit value used to reduce the
client's transfer balance account is shown in the next table.
| Income Stream |
Must meet SIS regulation |
Debit value |
| Lifetime pension commenced at any time |
1.06(2) |
Original special value less any debits |
| Life expectancy pensions |
1.06(7) |
A new special value calculated at time of communtation (annual income entitlement x remaining term) |
| Market linked pension |
1.06(8) |
A new special value calculated at time of communtation (annual income entitlement x remaining term) |
The general transfer cap is:
| From 1/7/2017 | $1.6m |
| From 1/7/2021 | $1.7m |
| From 1/7/2023 | $1.9m |
A person who has fully utilised their TBC gets no TBC increase. For others their "personal transfer balance cap" is based on the
complex pro-rata indexation.
Total Superannuation Balance
The Total Superannuation Balance includes the value of the client's superannuation interest in both accumulation and
retirement phase at the end of the previous year. There are special rules for how and when counted.