Excess Transfer Balance Cap Determination “ETBCD” Process
Glossary – The following titles will be featured:
|Glossary||Terms||Your Questions Explained|
|Your Transfer Balance||Eg. $1,904,146||– how is it calculated?|
|Transfer Balance Cap (TBC)||$1.6m||– when did this happen?|
|Your Excess Transfer Balance Amount||Eg. $304,146||– where do I find these funds? – what if this amount is more than I have?|
|Amount transfer balance cap exceeded||Eg. $293,623||– how is this determined?|
|Excess transfer balance earnings||Eg. $10,523||– how has the ATO determined this?|
Do you object to the ETBCD?
- Lodge objection on correct ATO form.
If you agree with the ETBCD. What happens next?
- Commute, Cash In or Move? If more than one fund (which is likely) – Decide to commute, cash in or move which is the best method to proceed?
- Considerations – which is the most tax effective going forward? Which fund?
- Instruct the trustee of the selected fund(s) to commute, cash or move the monies as per the ETBCD notice.
- Follow up trustee to ensure fund has followed your instructions and monies moved.
- Issue ATO with Transfer Balance Account Report (TBAR) form with correct details (SMSF only).
- Follow up ATO to ensure TBAR notice received in prescribed time.
- Wait for “Your superannuation excess transfer balance tax notice of assessment” from ATO.
- Based upon the “Excess transfer balance earnings” the following titles are featured:
|Excess period 03/08/2017 to XX/XX/2018||– this is the period you were in excess of your TBC|
|Your transfer balance cap||– $1.6m|
|Amount transfer balance cap exceeded||– Value of Pension Assets (including ATO’s ‘lump sum’ value assessment of your annual income) above your transfer balance cap|
|Excess transfer balance earnings||– Amount transfer balance cap is exceeded multiplied by the ATO’s General Interest Charge Rate of 8.77%.|
|Tax rate applied||– 15%|
|Tax due||– excess earnings multiplied by 15%
– check your calculations 3x.
- Pay by the due date on the front of the ‘tax notice of assessment’ letter.
- Follow up to ensure/confirm payment.
- Wait for the penalty notice to be issued (all pension monies were expected to be within the TBC as at 1 July 2017) penalties may be backdated to this date and will be levied at the 1st penalty rate of 15%;
- Monitor all future activity to ensure that you don’t breach the TBC again – next breach will be penalised at the 2nd penalty rate of 30%.