2016-17 Federal Budget FAQ

Frequently asked questions about the Government’s changes to superannuation introduced in the 2016-2017 Federal Budget.

Transfer Balance Cap (TBC)

What is the Transfer Balance Cap?

The TBC is a new concept in superannuation. It is a limit applied to the total amount of superannuation that can be transferred into a superannuation income stream or pension product (a ‘retirement phase account’).

Who does it apply to?

The TBC will apply to all members who commence, or already have, a retirement phase account on or after 1 July 2017.

The CSS will calculate a value and report this against the members TBC. Ongoing management of the cap is a matter between the member and the Australian Taxation Office (ATO).

The workings of the TBC are complex and will be explained in more detail in a factsheet in the near future.

How is my pension valued?

The valuation differs depending on the type of pension you are receiving.

Your CSS pension will be valued by multiplying your annual gross pension by a factor of 16.

How does this apply to my reversionary or invalidity pension?

Reversionary and invalidity pensions will be subject to the TBC and the same methodology (i.e. using a factor of 16) will be applied when calculating the credit.

What if I have other pension products?

The TBC is a single lifetime cap applied to an individual, and applies collectively to all amounts in the retirement phase held by that individual. If you have more than one pension product, each product will be valued and reported by the respective provider to the ATO.

Does the TBC limit how much I can hold in my accumulation phase account?

No, the TBC only limits how much you can transfer into a retirement phase account.

An accumulation phase account is the amount you hold in super that you have not yet claimed.

Do Transition to Retirement pensions count towards the cap?

No. However, some CSS members can access their CSS entitlement while still working for the same employer. While this scenario is similar to Transition to Retirement, these pensions are not regarded as Transition to Retirement income streams for the purposes of this measure. Any pension paid under these arrangements will be counted towards the TBC.

Will the TBC be indexed?

Yes, the TBC will be indexed periodically in $100,000 increments in line with CPI. However, once you have reached your cap, indexation will not apply.

What happens if I exceed the TBC?

Generally, members will be required to remove any amount in excess of the cap. However, this does not apply to members of defined benefit schemes. Where a defined benefit pension has a value that is higher than the TBC, they are not required to remove the excess amount, however tax concessions on pensions will be restricted to achieve commensurate treatment.

How will my pension be taxed?

CSS pensions over $100,000 per annum will be subject to additional tax. This is so commensurate treatment can be achieved in cases where a defined benefit pension recipient is unable to remove an excess amount. Our current understanding is that these changes will only affect members over 60 years old, or recipients of reversionary benefits who receive over 60 tax treatment.

50% of any amount of a taxed pension (your tax free and taxable taxed components) over $100,000 per annum will be included in the recipient’s assessable income. Any amount of an untaxed pension (your taxable untaxed component) over $100,000 per annum will be taxed at full marginal rates (with no 10% offset). For hybrid taxed/untaxed pensions over $100,000, the untaxed component will be stacked on top of the taxed component.

Is it one cap per pension, or per person?

The TBC is applied to an individual, and is applied collectively to all retirement phase accounts held by that individual.

I’ve read that “broadly commensurate” treatment will apply to CSS members, what does that mean?

CSS are unable to remove an excess amount where their pension is valued at more than $1.6m. To replicate the effect of the TBC – that is, to restrict the amount of tax free pension a member can receive – tax concessions applied to these pensions will be restricted.

Do lump sum payments count towards the cap?

No, benefits withdrawn as a superannuation lump sum do not count towards the TBC.

Is the gross or net pension valued?

The gross pension will be valued.

What tax components of the pension are valued?

The valuation is performed against the total gross pension, not individual components.

What happens when CPI is applied to my pension after it’s valued?

Your pension will not have a new value calculated each time your pension increases with CPI. Generally, only the commencing value (or the value at 30 June 2017 for existing pensioners) will be reported against your cap.

Is the non-indexed portion of my pension counted towards the cap?

Yes, the entire gross pension will be valued and reported against the cap.

Do these changes mean CSS members can now commute their pension?

No, there have been no changes to scheme rules that would allow a pension to be commuted.

Do I have to commute my pension if my pension is valued at more than $1.6m?

Under the scheme rules, a CSS pension cannot be commuted. If your pension is valued at more than $1.6m, any tax concessions applied to your pension will be restricted.

Where can I get more information?

Factsheets relating to the changes can be found on the Budget 2016–17 website fact sheet page.

Concessional Contributions Cap (CCC)

What contributions count towards the $25,000 cap?

  • any salary sacrifice contributions
  • any superannuation guarantee contributions
  • notional employer contribution amounts (calculated)

How is the notional employer component calculated?

The notional employer contribution is calculated using an actuarial1 formula. It should be noted that the calculation of the notional defined benefit component is complex. To help you understand the impact of the notional contribution amount on your CCC, CSC have developed a concessional contribution estimator tool, which is available through Member Services Online (MSO), to help you manage your concessional contribution cap.

1 i.e. a formula designated by an independent Actuary.

How will I know if I am going to exceed my cap?

The CSS cannot tell you if you are going to exceed your cap as it is managed by the ATO. You should contact the ATO for this information.

What is the 5 year catch up provision?

One of the Federal Budget measures includes the introduction of a 5 year catch up provision. Members with a total superannuation balance of less than $500,000 on 30 June who haven’t reached their CCC will be eligible to ‘roll forward’ their unused cap space for 5 years.

Non-Concessional Contributions Cap (NCC)

What contributions count towards the $100,000 cap?

Non-concessional contributions are personal post-tax contributions for which you do not claim a tax deduction i.e. your member contributions.

How will I know if I am going to exceed my cap?

The CSS cannot tell you if you are going to exceed your cap as it is managed by the ATO. You should contact the ATO for this information.

Does this change the current 3 year bring forward provision?

The 3 year bring forward provision still applies for members with a total superannuation balance of less than $1.4 million. Members who have a total superannuation balance over this threshold are subject to limited bring forward provisions. Please refer to the ATO’s website for more details of these changes.

What happens if my balance is more than $1.6m or I reach my cap?

Defined benefit members will not be required to cease making non-concessional contributions. However, any amount in excess of the cap, or contributions paid where a total superannuation balance exceeds $1.6m, will result in Excess Contributions Tax being applied by the ATO.

Total Superannuation Balance (TSB)

What is the Total Superannuation Balance?

The Total Superannuation Balance is the value of your super interests in both the retirement and accumulation phase, and may impact your ability to pay superannuation contributions. It is calculated by:

  • adding together:
    • the accumulation phase value of any superannuation interests that are not in the retirement phase
    • the value of any superannuation income streams in the retirement phase
    • any transferred amounts that have not been credited to an account on 30 June
  • subtracting any personal injury or structured settlement contributions that have been paid into a superannuation fund

What will CSS report against the Total Superannuation Balance?

CSS will report an amount in respect of your Accumulation Phase Value effective 30 June each year, commencing from 30 June 2017. If you are in receipt of a CSS pension, the value reported against your Transfer Balance Account (The Transfer Balance Cap [PDF 364 KB]) will count towards your Total Superannuation Balance.

What is the Accumulation Phase Value (APV)?

APV is defined as the total amount that would become payable if an individual voluntarily caused their superannuation interest to cease. CSC will report the APV for your CSS interest as the total of the following:

  • 2.5 x accumulated basic contributions (to represent a notional employer component); and
  • accumulated member contributions; and
  • accumulated productivity contributions; and
  • any transferred amounts, including any co-contributions, LISC, LISTO, or ATO SG.

What is the Retirement Phase Value?

The Retirement Phase Value is the total of all products you hold in the retirement phase (i.e. superannuation income streams). Generally, this will be the value of your Transfer Balance Account (The Transfer Balance Cap [PDF 364 KB]).

Where can I find the value of my Total Superannuation Balance?

It is important to remember your TSB is the total of all superannuation interests held by you – both in the accumulation and retirement phase – and the value of the TSB is recorded and maintained by the ATO. However, the ATO have indicated they will not be in a position to receive the 30 June 2017 APV which funds are required to report until late 2017. You will not be able to obtain your TSB by contacting the ATO or using myGov before this time. Until then, you will need to seek APV details for your superannuation interests directly from the relevant fund. CSC will advise on the CSS website when 30 June 2017 APVs for members are available.

Can I reduce my Total Superannuation Balance?

You may be able to reduce your Total Superannuation Balance by removing funds from the accumulation and/or retirement phase, however this will be subject to the rules of the relevant provider. As the Total Superannuation Balance will be captured as at 30 June, any withdrawals or commutations that occur after your Total Superannuation Balance is captured will not be reflected until the following year.

Can I stop making non-concessional contributions to CSS?

You may be eligible to reduce your member contribution rate to 0%. However, as this can restrict the growth of your benefit, you should carefully consider the impact on your future benefit if you are contemplating contributing at a lower rate. More information on contributing to CSS can be found in the member contributions section.