ETBCD – Step by Step Guide

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?

  1. Lodge objection on correct ATO form.

 

If you agree with the ETBCD.  What happens next?

  1. 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?
  2. Instruct the trustee of the selected fund(s) to commute, cash or move the monies as per the ETBCD notice.
  3. Follow up trustee to ensure fund has followed your instructions and monies moved.
  4. Issue ATO with Transfer Balance Account Report (TBAR) form with correct details (SMSF only).
  5. Follow up ATO to ensure TBAR notice received in prescribed time.
  6. 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.

  1. Pay by the due date on the front of the ‘tax notice of assessment’ letter.
  2. Follow up to ensure/confirm payment.
  3. 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%;
  4. 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%.

 

 

General Advice Warning
The advice contained within this document does not take into account any persons particular objectives, needs or financial situation.  Before making a decision regarding the acquisition or disposal of a Financial Product persons should assess whether the advice is appropriate to their objectives, needs or financial situation.  Persons may wish to make this assessment themselves or seek the help of an adviser.  No responsibility is taken for persons acting on the information within this document.  Persons doing so, do so at their own risk. Before acquiring a financial product, a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.
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