Commonwealth: Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 (Cth)

Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 No. 81, 2016 Compilation No. 1 Compilation date: 1 January 2017 Includes amendments up to: Act No. 55, 2017 Registered: 29 June 2017 About this compilation This compilation This is a compilation of the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 that shows the text of the law as amended and in force on 1 January 2017 (the compilation date). The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law. Uncommenced amendments The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on the Legislation Register (www.legislation.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the series page on the Legislation Register for the compiled law. Application, saving and transitional provisions for provisions and amendments If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes. Editorial changes For more information about any editorial changes made in this compilation, see the endnotes. Modifications If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the series page on the Legislation Register for the compiled law. Self‑repealing provisions If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes. Contents 1 Short title 2 Commencement 3 Schedules Schedule 1—Transfer balance cap Part 1—Transfer balance cap Administrative Decisions (Judicial Review) Act 1977 Income Tax Assessment Act 1997 Superannuation Industry (Supervision) Act 1993 Superannuation (Resolution of Complaints) Act 1993 Taxation Administration Act 1953 Part 2—Defined benefit income Income Tax Assessment Act 1997 Taxation Administration Act 1953 Part 3—Application and transitional provisions Income Tax (Transitional Provisions) Act 1997 Schedule 2—Concessional superannuation contributions Part 1—Excess concessional contributions Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Part 2—Division 293 tax Income Tax Assessment Act 1997 Taxation Administration Act 1953 Part 3—Superannuation guarantee charge Superannuation Guarantee (Administration) Act 1992 Schedule 3—Non‑concessional contributions Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Superannuation (Government Co‑contribution for Low Income Earners) Act 2003 Schedule 4—Low income superannuation tax offset Part 1—Low income superannuation tax offset Superannuation (Government Co‑contribution for Low Income Earners) Act 2003 Part 2—Other amendments Minerals Resource Rent Tax Repeal and Other Measures Act 2014 Schedule 5—Deducting personal contributions Income Tax Assessment Act 1997 Schedule 6—Unused concessional cap carry forward Income Tax Assessment Act 1997 Schedule 7—Tax offsets for spouse contributions Income Tax Assessment Act 1997 Schedule 8—Innovative income streams and integrity Part 1—Amendments Income Tax Assessment Act 1997 Part 2—Application Schedule 9—Anti‑detriment provisions Part 1—Amendments Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Part 2—Application Schedule 10—Administrative streamlining Part 1—Release authority harmonisation Division 1—Main amendments Taxation Administration Act 1953 Division 2—Other amendments Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Taxation Administration Act 1953 Taxation (Interest on Overpayments and Early Payments) Act 1983 Division 3—Application of amendments Part 2—End benefit caps Taxation Administration Act 1953 Part 3—Combining notices Division 1—Main amendments Taxation Administration Act 1953 Division 2—Other amendments Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Petroleum Resource Rent Tax Assessment Act 1987 Superannuation Guarantee (Administration) Act 1992 Taxation Administration Act 1953 Division 3—Application of amendments Part 4—Early release of benefits Superannuation Act 1976 Part 5—Objective of the superannuation system Legislation Act 2003 Schedule 11—Dictionary Income Tax Assessment Act 1997 Endnotes Endnote 1—About the endnotes Endnote 2—Abbreviation key Endnote 3—Legislation history Endnote 4—Amendment history An Act to amend the law relating to taxation and superannuation, and for related purposes 1 Short title This Act is the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016. 2 Commencement (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms. Commencement information Column 1 Column 2 Column 3 Provisions Commencement Date/Details 1. Sections 1 to 3 and anything in this Act not elsewhere covered by this table The day this Act receives the Royal Assent. 29 November 2016 2. Schedules 1, 2 and 3 The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent. 1 January 2017 3. Schedule 4 2 July 2017. 2 July 2017 4. Schedules 5 to 9 The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent. 1 January 2017 5. Schedule 10, Part 1 1 July 2018. 1 July 2018 6. Schedule 10, Parts 2 and 3 The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent. 1 January 2017 7. Schedule 10, Part 4 1 July 2018. 1 July 2018 8. Schedule 10, Part 5 The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent. 1 January 2017 9. Schedule 11 The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent. 1 January 2017 Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act. (2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act. 3 Schedules Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—Transfer balance cap Part 1—Transfer balance cap Administrative Decisions (Judicial Review) Act 1977 1 After paragraph (gaa) of Schedule 1 Insert: (gab) decisions of the Commissioner of Taxation under Subdivision 136‑A in Schedule 1 to the Taxation Administration Act 1953; Income Tax Assessment Act 1997 2 After section 26‑98 Insert: 26‑99 Excess transfer balance tax cannot be deducted You cannot deduct under this Act an amount of *excess transfer balance tax that you pay. 3 At the end of section 102‑20 Add: Note 7: This section does not apply in relation to the capital gain mentioned in paragraph 294‑120(5)(b) of the Income Tax (Transitional Provisions) Act 1997. 4 After Division 293 Insert: Division 294—Transfer balance cap Table of Subdivisions Guide to Division 294 294‑A Object of this Division 294‑B Transfer balance account 294‑C Transfer balance debits 294‑D Modifications for certain defined benefit income streams 294‑E Modifications for death benefits dependants who are children 294‑F Excess transfer balance tax Guide to Division 294 294‑1 What this Division is about There is a cap on the total amount you can transfer into the retirement phase of superannuation (where earnings are exempt from taxation). Credits are added to a transfer balance account when you transfer amounts. If the balance in your account exceeds the cap, you will be required to remove the excess from the retirement phase, and you will be liable to pay excess transfer balance tax. Note: Division 136 in Schedule 1 to the Taxation Administration Act 1953 contains rules about excess transfer balance determinations and commutation authorities. Subdivision 294‑A—Object of this Division Table of sections Operative provisions 294‑5 Object of this Division Operative provisions 294‑5 Object of this Division The object of this Division is to limit the total amount of an individual's *superannuation income streams that receive an earnings tax exemption. Subdivision 294‑B—Transfer balance account Guide to Subdivision 294‑B 294‑10 What this Subdivision is about This Subdivision creates a transfer balance account for you, and credits it, if you have a superannuation income stream in the retirement phase. It also provides for a transfer balance cap and identifies when you have excess transfer balance. Table of sections Operative provisions 294‑15 When you have a transfer balance account 294‑20 Meaning of retirement phase recipient 294‑25 Transfer balance credits 294‑30 Excess transfer balance 294‑35 Your transfer balance cap 294‑40 Proportionally indexed transfer balance cap 294‑45 Transfer balance account ends 294‑50 Assume pension rules and commutation authorities complied with Operative provisions 294‑15 When you have a transfer balance account (1) You have a transfer balance account if you are, or have at any time been, the *retirement phase recipient of a *superannuation income stream. (2) You start to have the *transfer balance account on the later of: (a) 1 July 2017; and (b) the day you first start to be a *retirement phase recipient of a *superannuation income stream. 294‑20 Meaning of retirement phase recipient (1) You are the retirement phase recipient of a *superannuation income stream at a time if: (a) the superannuation income stream is in the *retirement phase at that time; and (b) a *superannuation income stream benefit from the superannuation income stream is payable to you at that time. (2) You are also the retirement phase recipient of a *superannuation income stream at a time if: (a) the superannuation income stream is in the *retirement phase at that time; and (b) the superannuation income stream is a *deferred superannuation income stream; and (c) a *superannuation income stream benefit from the superannuation income stream will be payable to you after that time. 294‑25 Transfer balance credits (1) The following table sets out when a credit arises in your *transfer balance account and the amount of the credit. The credit is called a transfer balance credit. Credits in the transfer balance account Item If: A credit of: Arises: 1 just before 1 July 2017, you are the *retirement phase recipient of a *superannuation income stream the *value, just before 1 July 2017, of the *superannuation interest that supports the superannuation income stream on the later of: (a) 1 July 2017; and (b) if you are a reversionary beneficiary—the last day of the period of 12 months beginning on the day a *superannuation income stream benefit first becomes payable from the income stream 2 on a day (the starting day) on or after 1 July 2017, you start to be the *retirement phase recipient of a *superannuation income stream the *value on the starting day of the *superannuation interest that supports the superannuation income stream (a) on the starting day, unless paragraph (b) applies; or (b) if you are a reversionary beneficiary—at the end of the period of 12 months beginning on the starting day 3 you have *excess transfer balance at the end of a day your *excess transfer balance earnings for that day at the start of the next day Note 1: The amount of the transfer balance credit is modified for certain capped defined benefit income streams: see Subdivision 294‑D. Note 2: For the meaning of excess transfer balance earnings, see section 294‑235. Note 3: If a payment split applies to payments from the superannuation income stream, a debit arises under section 294‑90. No crediting of earnings if determination issued (2) Despite item 3 of the table in subsection (1), no credit arises in your *transfer balance account under that item because of *excess transfer balance at the end of a day if the day is in the period: (a) starting on the day the Commissioner makes an *excess transfer balance determination in respect of you; and (b) ending on: (i) unless subparagraph (ii) applies—the first day on which the sum of all *transfer balance debits arising in your *transfer balance account since the determination was issued equals or exceeds the *crystallised reduction amount; or (ii) if a *transfer balance credit arises in your transfer balance account before the day mentioned in subparagraph (i)—the day on which that credit arises. Note: For provisions about excess transfer balance determinations, see Division 136 in Schedule 1 to the Taxation Administration Act 1953. 294‑30 Excess transfer balance (1) You have excess transfer balance at a particular time if, at that time, the *transfer balance in your *transfer balance account exceeds your *transfer balance cap at that time. The amount of the excess transfer balance is the amount of the excess. Note: There is a modification for certain capped defined benefit income streams: see Subdivision 294‑D. (2) The transfer balance in your *transfer balance account at a time equals: (a) the sum of the *transfer balance credits in the account at that time; less (b) the sum of the *transfer balance debits (if any) in the account at that time. Note 1: For transfer balance debits, see Subdivision 294‑C. Note 2: There is no consequence for having a negative transfer balance. 294‑35 Your transfer balance cap (1) Your transfer balance cap for the *financial year in which you first start to have a *transfer balance account is equal to the *general transfer balance cap for that financial year. Note: The amount of the transfer balance cap is modified for child recipients: see Subdivision 294‑E. (2) Your transfer balance cap for a later *financial year is equal to your transfer balance cap for the previous year, subject to section 294‑40 (which is about proportional indexation). (3) The general transfer balance cap is: (a) for the 2017‑2018 *financial year—$1,600,000; or (b) for the 2018‑2019 financial year or a later financial year—the amount worked out by indexing annually the amount mentioned in paragraph (a). Note: Subdivision 960‑M shows how to index amounts. However, annual indexation does not necessarily increase the amount of the cap: see section 960‑285. 294‑40 Proportionally indexed transfer balance cap (1) This section applies to increase your transfer balance cap for a *financial year (other than the financial year in which you first start to have a *transfer balance account) if: (a) the *general transfer balance cap is increased as a result of indexation for the financial year; and (b) at no time before the start of that financial year has the *transfer balance in your transfer balance account at the end of a day exceeded your transfer balance cap. (2) Your transfer balance cap is increased for the *financial year by the amount worked out using the following formula: where: indexation increase means the amount by which the *general transfer balance cap for the *financial year increased as a result of indexation. unused cap percentage is worked out by: (a) identifying the highest *transfer balance in your *transfer balance account at the end of any day up to the end of the previous *financial year; and (b) identifying the day on which the transfer balance account had that transfer balance at the end of the day, or, if your transfer balance account had that transfer balance at the end of more than one day, the earliest of those days; and (c) expressing the transfer balance identified in paragraph (a) as a percentage (rounded down to the nearest whole number) of your *transfer balance cap on the day identified in paragraph (b); and (d) subtracting the result of paragraph (c) from 100%. (3) However, if the highest *transfer balance mentioned in paragraph (a) of the definition of unused cap percentage in subsection (2) is less than nil, that unused cap percentage is taken to be 100%. 294‑45 Transfer balance account ends The *transfer balance account ceases when the *retirement phase recipient dies. 294‑50 Assume pension rules and commutation authorities complied with (1) For the purposes of working out a matter mentioned in subsection (2) at a time: (a) assume that an income stream will properly comply with any rules or standards under which it is, or is purported to be, provided; and (b) disregard subsection 307‑80(4). (2) The matters are: (a) whether you are the *retirement phase recipient of a *superannuation income stream; and (b) whether a *transfer balance credit arises in your *transfer balance account. Subdivision 294‑C—Transfer balance debits Guide to Subdivision 294‑C 294‑75 What this Subdivision is about A debit arises in your transfer balance account when superannuation income streams that were previously credited (because they receive the earnings tax exemption) are reduced (other than by draw‑downs or investment losses) or lose the earnings tax exemption. A debit also arises in your transfer balance account when you make a contribution relating to a structured settlement or personal injury, or where certain events occur that result in you having reduced superannuation. Table of sections Operative provisions 294‑80 Transfer balance debits 294‑85 Certain events that result in reduced superannuation 294‑90 Payment splits 294‑95 Payment splits—no double debiting Operative provisions 294‑80 Transfer balance debits (1) The following table sets out when a debit arises in your *transfer balance account and the amount of the debit. The debit is called a transfer balance debit. Debits in the transfer balance account Item If: A debit of: Arises: 1 you receive a *superannuation lump sum because a *superannuation income stream of which you are a *retirement phase recipient is commuted, in full or in part the amount of the superannuation lump sum at the time you receive the superannuation lump sum 2 a *structured settlement contribution is made in respect of you the amount of the contribution at the later of: (a) the time the contribution is made; and (b) the start of the day you first start to have a *transfer balance account 3 a *transfer balance debit arises under section 294‑85 because of an event that results in reduced superannuation the amount of the debit specified in section 294‑85 at the time provided by section 294‑85 4 a *transfer balance debit arises under section 294‑90 because of a payment split the amount of the debit specified in section 294‑90 at the time provided by section 294‑90 5 a *superannuation income stream of which you are a *retirement phase recipient stops being in the *retirement phase under subsection 307‑80(4) the *value of the *superannuation interest that supports the superannuation income stream at the end of the period within which the commutation authority mentioned in that subsection was required to be complied with at the end of the period within which the commutation authority mentioned in that subsection was required to be complied with 6 an income stream of which you were a *retirement phase recipient stops being a *superannuation income stream that is in the *retirement phase at a time (the stop time), but items 1 and 5 do not apply the *value of the *superannuation interest that supports the income stream at the end of the income year of the *superannuation income stream provider in which the stop time occurs at the end of the income year of the superannuation income stream provider in which the stop time occurs 7 the Commissioner gives you a notice under section 136‑70 in Schedule 1 to the Taxation Administration Act 1953 (about non‑commutable excess transfer balance) the amount of the *excess transfer balance stated in the notice at the time the Commissioner issues the notice Structured settlement contributions (2) Each of the following is a structured settlement contribution in respect of you: (a) a contribution to a *complying superannuation plan in respect of you that is covered under section 292‑95 (about structured settlements or orders for personal injuries); (b) a contribution to a complying superannuation plan in respect of you that would be covered under section 292‑95 if: (i) the section applied to contributions made before 10 May 2006; and (ii) paragraphs 292‑95(1)(b) and (d) were disregarded. 294‑85 Certain events that result in reduced superannuation (1) A *transfer balance debit arises in your *transfer balance account if: (a) subsection (2) or (5) provides that the debit arises; and (b) you notify the Commissioner in the *approved form that the debit has arisen. Fraud or dishonesty (2) A debit arises if: (a) a loss is suffered by a *superannuation income stream provider; and (b) as a result, the *value of the *superannuation interest that supports a *superannuation income stream of which you are the *retirement phase recipient is reduced; and (c) the loss is a result of fraud or dishonesty; and (d) an individual has been convicted of an offence involving that fraud or dishonesty. (3) The amount of the debit equals the amount by which the *value of the *superannuation interest is reduced as a result of the loss. (4) The debit arises at the time of the loss. Payments under section 139ZQ of the Bankruptcy Act 1966 (5) A debit arises if: (a) an amount is paid in compliance with a notice given under section 139ZQ of the Bankruptcy Act 1966; and (b) as a result, the *value of a *superannuation interest that supports a *superannuation income stream of which you are the *retirement phase recipient is reduced. (6) The amount of the debit is the amount paid to the trustee in bankruptcy. (7) The debit arises at the time of the payment. 294‑90 Payment splits (1) A *transfer balance debit arises in your *transfer balance account if: (a) subsection (2) provides that the debit arises; and (b) the Commissioner is notified in the *approved form that the debit has arisen. Payment splits (2) A debit arises if: (a) a *superannuation interest is subject to a *payment split but remains an interest of the *member spouse; and (b) the superannuation interest supports a *superannuation income stream that is in the *retirement phase; and (c) as a result of the payment split, a proportion of all *superannuation income stream benefits from the income stream is to be paid to a *non‑member spouse; and (d) as a result, the member spouse and the non‑member spouse are both *retirement phase recipients of the superannuation income stream. (3) The amount of the debit is: (a) if you are the *member spouse—the proportion mentioned in paragraph (2)(c); and (b) if you are the *non‑member spouse—the remaining proportion; of the *value, on the day the debit arises, of the *superannuation interest that supports the *superannuation income stream affected by the *payment split. (4) The debit arises at the later of: (a) the operative time (within the meaning of Part VIIIB of the Family Law Act 1975) for the *payment split; and (b) at the start of the day you first start to have a *transfer balance account. 294‑95 Payment splits—no double debiting If a *transfer balance debit, worked out by reference to a particular proportion, arises in your *transfer balance account because a *superannuation interest is subject to a *payment split, each of the following debits arising in your account at a later time in respect of the same interest is to be reduced by the same proportion: (a) a debit that arises under item 1 of the table in subsection 294‑80(1) (about commutations), but only if the commuted income stream is a *capped defined benefit income stream; (b) a debit that arises under item 3 of that table (about events that result in reduced superannuation); (c) a debit that arises under item 5 or 6 of that table (about income streams that stop being in the retirement phase). Subdivision 294‑D—Modifications for certain defined benefit income streams Guide to Subdivision 294‑D 294‑120 What this Subdivision is about Certain defined benefit lifetime pensions that are subject to commutation restrictions cannot result in excess transfer balance (instead, Subdivision 303‑A applies to the superannuation income stream benefits). Certain commutation‑restricted income streams started before 1 July 2017 are covered by the same modification. Table of sections Operative provisions 294‑125 When this Subdivision applies 294‑130 Meaning of capped defined benefit income stream 294‑135 Transfer balance credit—special rule for capped defined benefit income streams 294‑140 Excess transfer balance—special rule for capped defined benefit income streams 294‑145 Transfer balance debits—special rules for capped defined benefit income streams Operative provisions 294‑125 When this Subdivision applies This Subdivision applies to you if you are the *retirement phase recipient of a *capped defined benefit income stream. 294‑130 Meaning of capped defined benefit income stream (1) A *superannuation income stream is a capped defined benefit income stream if it is: (a) covered by an item of the following table; and (b) if it is covered by any of items 2 to 7 of that table—it is in the *retirement phase just before 1 July 2017. Capped defined benefit income streams Item Topic A superannuation income stream is covered if: 1 Lifetime pension it is a pension for the purposes of the Superannuation Industry (Supervision) Act 1993 (the SIS Act) that is provided under rules that meet the standards of subregulation 1.06(2) of the Superannuation Industry (Supervision) Regulations 1994 (the SIS Regulations) 2 Lifetime annuity it is an annuity for the purposes of the SIS Act that is provided under a contract that meets the standards of subregulation 1.05(2) of the SIS Regulations 3 Life expectancy pension it is a pension for the purposes of the SIS Act that is provided under rules that meet the standards of subregulation 1.06(7) of the SIS Regulations 4 Life expectancy annuity it is an annuity for the purposes of the SIS Act that is provided under a contract that meets the standards of subregulation 1.05(9) of the SIS Regulations 5 Market linked pension it is a pension for the purposes of the SIS Act that is provided under rules that meet the standards of subregulation 1.06(8) of the SIS Regulations 6 Market linked annuity it is an annuity for the purposes of the SIS Act that is provided under a contract that meets the standards of subregulation 1.05(10) of the SIS Regulations 7 Market linked pension (RSA) it is a pension for the purposes of the Retirement Savings Accounts Act 1997 that is provided under terms and conditions that meet the standards of subregulation 1.07(3A) of the Retirement Savings Accounts Regulations 1997 (2) A *superannuation income stream is also a capped defined benefit income stream if the income stream is prescribed by the regulations for the purposes of this subsection. 294‑135 Transfer balance credit—special rule for capped defined benefit income streams (1) Section 294‑25 applies in relation to a *capped defined benefit income stream as if a reference in that section to the *value of a *superannuation interest were a reference to the *special value of the superannuation interest. Meaning of special value—lifetime products (2) The special value, at a particular time, of a *superannuation interest that supports an income stream that is, or was at any time, a *capped defined benefit income stream covered by item 1 or 2 of the table in subsection 294‑130(1), is the amount worked out using the formula: where: annual entitlement is worked out by: (a) dividing the amount of the first *superannuation income stream benefit you are entitled to receive from the income stream just after that time by the number of whole days to which that benefit relates; and (b) multiplying the result by 365. Meaning of special value—life expectancy and market linked products (3) The special value, at a particular time, of a *superannuation interest that supports an income stream that is, or was at any time, a *capped defined benefit income stream covered by any of items 3 to 7 of the table in subsection 294‑130(1), is the amount worked out using the formula: where: annual entitlement has the same meaning as in subsection (2) of this section. remaining term means the number of years remaining at that time in the period throughout which *superannuation income stream benefits are payable under the income stream, rounded up to the next whole number. Regulations (4) The regulations may specify a method for determining the special value of a *superannuation interest that supports a *superannuation income stream prescribed by regulations made for the purposes of subsection 294‑130(2). 294‑140 Excess transfer balance—special rule for capped defined benefit income streams (1) Despite section 294‑30, you have excess transfer balance at a particular time if, at that time, the *transfer balance in your *transfer balance account: (a) exceeds your *transfer balance cap at that time; and (b) exceeds your capped defined benefit balance from subsection (3) of this section at that time. (2) The amount of the excess transfer balance is the lesser of the 2 excesses. Note: For modifications of the tax treatment of benefits paid from capped defined benefit income streams, see Subdivision 303‑A. Your capped defined benefit balance (3) You have an amount under this subsection (a capped defined benefit balance) at a time equal to: (a) the sum of the *transfer balance credits in your *transfer balance account at that time in respect of *capped defined benefit income streams; less (b) the sum of the *transfer balance debits (if any) in your transfer balance account at that time in respect of capped defined benefit income streams. 294‑145 Transfer balance debits—special rules for capped defined benefit income streams Debit for commutation (1) Item 1 of the table in subsection 294‑80(1) applies in relation to a *capped defined benefit income stream as if the reference in column 2 of that item to the amount of the *superannuation lump sum were a reference to: (a) for a commutation in full—the *debit value, just before the superannuation lump sum is paid, of the *superannuation interest that supports the capped defined benefit income stream; or (b) for a commutation in part—the debit value mentioned in paragraph (a), multiplied by the fraction: where: SV just after commutation means the *special value, just after the *superannuation lump sum is paid, of the *superannuation interest that supports the *capped defined benefit income stream. SV just before commutation means the *special value, just before the *superannuation lump sum is paid, of the *superannuation interest that supports the *capped defined benefit income stream. Debit for events that result in reduced superannuation (2) Item 3 of the table in subsection 294‑80(1) (about events that result in reduced superannuation) applies in relation to a *capped defined benefit income stream as if the amount of the debit provided for in section 294‑85 was the *debit value, just before the loss or payment reduces the *value of the *superannuation interest that supports the capped defined benefit income stream, multiplied by the amount worked out using the following formula: where: SV just after event means the *special value, worked out just after the loss or payment reduces the *value of the *superannuation interest that supports the *capped defined benefit income stream. SV just before event means the *special value, worked out just before the loss or payment reduces the *value of the *superannuation interest that supports the *capped defined benefit income stream. Debit for payment split (3) Item 4 of the table in subsection 294‑80(1) (about a debit for a payment split) applies in relation to a *capped defined benefit income stream as if the reference in section 294‑90 to the *value of the *superannuation interest were a reference to the *debit value of the superannuation interest. Debits for loss of earnings exemption (4) Items 5 and 6 of the table in subsection 294‑80(1) apply in relation to an income stream that is, or was, a *capped defined benefit income stream as if the reference in the item to the *value of a *superannuation interest were a reference to the *debit value of the superannuation interest. Meaning of debit value (5) The debit value, at a particular time, of a *superannuation interest that supports an income stream that is, or was at any time, a *capped defined benefit income stream covered by item 1 or 2 of the table in subsection 294‑130(1), is: (a) the amount of the *transfer balance credit that arose in your *transfer balance account in respect of the income stream; less (b) the amount of any *transfer balance debits (apart from debits arising under item 4 of the table in subsection 294‑80(1)) that have arisen in your transfer balance account in respect of the income stream before that time. (6) The debit value, at a particular time, of a *superannuation interest that supports an income stream that is, or was at any time, a *capped defined benefit income stream covered by any of items 3 to 7 of the table in subsection 294‑130(1) is the *special value of the interest at that time. Regulations (7) The regulations may specify a method for determining the debit value of a *superannuation interest that supports a *superannuation income stream prescribed by regulations made for the purposes of subsection 294‑130(2). Subdivision 294‑E—Modifications for death benefits dependants who are children Guide to Subdivision 294‑E 294‑170 What this Subdivision is about If you are a death benefits dependant, and a child, you are not required to use your retirement transfer balance cap to receive a death benefits income stream. However, there is a cap on the total amount of your death benefits income streams that receives the earnings tax exemption. This cap is based on the deceased's superannuation interests in the retirement phase, or, if the deceased did not have any superannuation interests in the retirement phase, on the transfer balance cap. Table of sections Operative provisions 294‑175 When this Subdivision applies 294‑180 Transfer balance account ends 294‑185 Transfer balance cap—special rule for child recipient 294‑190 Cap increment—child recipient just before 1 July 2017 294‑195 Cap increment—child recipient on or after 1 July 2017, deceased had no transfer balance account 294‑200 Cap increment—child recipient on or after 1 July 2017, deceased had transfer balance account Operative provisions 294‑175 When this Subdivision applies (1) This Subdivision applies to you if you are a *child recipient of a *superannuation income stream. (2) You are a child recipient of a *superannuation income stream if: (a) because of the death of a person, you are a *retirement phase recipient of the superannuation income stream; and (b) you are a *child, and a *death benefits dependant, of the deceased; and (c) you are covered by paragraph 6.21(2A)(b) of the Superannuation Industry (Supervision) Regulations 1994 or paragraph 4.24(3A)(b) of the Retirement Savings Accounts Regulations 1997 (which are about children who are under age 18, or under age 25 and financially dependent or who have a disability). 294‑180 Transfer balance account ends (1) Despite sections 294‑15 and 294‑45, your *transfer balance account ceases at a time if: (a) just before that time, you were a *child recipient of one or more *superannuation income streams; and (b) just after that time, you are no longer a child recipient of any superannuation income stream; and (c) no *transfer balance credits arose in the transfer balance account in respect of a superannuation income stream of which you were a *retirement phase recipient, but not a child recipient. (2) If you again start to have a *transfer balance account at a later time, this Division applies in relation to that later transfer balance account as if it were the only transfer balance account you have had. 294‑185 Transfer balance cap—special rule for child recipient (1) Despite section 294‑35, your transfer balance cap on a day is the sum of the cap increments that have arisen under this Subdivision on and before that day. Note: Your transfer balance cap is not worked out on a financial year basis and it is not indexed. (2) However, if there are one or more *superannuation income streams of which you are, on that day, a *retirement phase recipient but not a *child recipient, your transfer balance cap on that day is the sum of: (a) the sum of the cap increments that have arisen under this Subdivision on and before that day; and (b) your transfer balance cap for the *financial year in which the day falls, worked out disregarding: (i) any cap increments that arise under this Subdivision; and (ii) any *transfer balance credits or *transfer balance debits that have arisen in your *transfer balance account in respect of superannuation income streams of which you are a child recipient. Note: Paragraph (b) is the transfer balance cap you would have if you were not a child recipient of any income stream. Disregarding credits, debits and cap increments allows this cap to be indexed appropriately under section 294‑40 (which is about proportional indexation). 294‑190 Cap increment—child recipient just before 1 July 2017 (1) A cap increment arises if, just before 1 July 2017, you are the *child recipient of a *superannuation income stream. (2) The amount of the cap increment is the *general transfer balance cap. (3) The cap increment arises on 1 July 2017. 294‑195 Cap increment—child recipient on or after 1 July 2017, deceased had no transfer balance account (1) A cap increment arises if: (a) on a day (the starting day) on or after 1 July 2017, you start to be the *child recipient of a *superannuation income stream; and (b) the deceased did not have a *transfer balance account just before death. (2) The amount of the cap increment is: (a) the *general transfer balance cap, unless paragraph (b) applies; or (b) if you are not the only person to receive a *superannuation death benefit because of the death of the person—the proportion of the general transfer balance cap that corresponds to your share of the deceased's *superannuation interests. (3) The cap increment arises on the starting day. 294‑200 Cap increment—child recipient on or after 1 July 2017, deceased had transfer balance account (1) A cap increment arises if: (a) on a day (the starting day) on or after 1 July 2017, you start to be the *child recipient of a *superannuation income stream; and (b) the deceased had a *transfer balance account just before death. Income stream fully funded by deceased's retirement phase interests (2) If the *superannuation interest that supports the *superannuation income stream is wholly attributable to one or more superannuation interests of the deceased that were in the *retirement phase, the amount of the cap increment equals the amount of the *transfer balance credit that arises in your *transfer balance account in respect of the *superannuation income stream. Income stream fully funded by deceased's accumulation phase interests (3) If the *superannuation interest that supports the *superannuation income stream is wholly attributable to one or more superannuation interests of the deceased that were not in the *retirement phase, the amount of the cap increment is nil. Note: A superannuation income stream covered by this subsection will generally result in excess transfer balance. The exceptions are: where you have additional cap increments under section 294‑190 or 294‑195, or where you have a higher cap under subsection 294‑185(2) because you also receive a non‑death benefit income stream. Income stream partly funded by deceased's accumulation interests (4) If the *superannuation interest that supports the *superannuation income stream is: (a) in part (the retirement phase part) attributable to a superannuation interest of the deceased that was in the *retirement phase; and (b) in part attributable to a superannuation interest of the deceased that was not in the retirement phase; the amount of the cap increment is so much of the *transfer balance credit that arises in your *transfer balance account in respect of the superannuation income stream as represents the retirement phase part. Note: A superannuation income stream covered by this subsection will generally result in excess transfer balance. The exceptions are: where you have additional cap increments under section 294‑190 or 294‑195, or where you have a higher cap under subsection 294‑185(2) because you also receive a non‑death benefit income stream. Reduced increment for excess transfer balance (5) Despite subsections (2) and (4), the cap increment is reduced if there was *excess transfer balance in the deceased's *transfer balance account just before death. The amount of the reduction is: (a) the proportion of the excess transfer balance that corresponds to your share of the deceased's *superannuation interests that were in the *retirement phase; less (b) the amount of any *superannuation lump sum paid to you, because of the death of the person from a superannuation interest of the deceased that was in the retirement phase. When cap increment arises (6) The cap increment arises: (a) on the starting day, unless paragraph (b) applies; or (b) if you are a reversionary beneficiary—at the end of the period of 12 months beginning on the starting day. Treatment of investment earnings after death (7) For the purposes of working out under this section the extent to which a *superannuation interest is attributable to another superannuation interest, if: (a) a superannuation interest of the deceased was in the *retirement phase; and (b) on or after the death of the deceased, an amount of investment earnings is added to the superannuation interest; the superannuation interest is taken to include that amount of investment earnings, except to the extent that the amount of investment earnings includes an amount paid under a policy of insurance on the life of the deceased or an amount arising from self‑insurance. Subdivision 294‑F—Excess transfer balance tax Guide to Subdivision 294‑F 294‑225 What this Subdivision is about This Subdivision neutralises the earnings tax exemption on retirement phase income streams that result in excess transfer balance. Table of sections Operative provisions 294‑230 Excess transfer balance tax 294‑235 Your excess transfer balance earnings 294‑240 When tax is payable—original assessments 294‑245 When tax is payable—amended assessments 294‑250 General interest charge Operative provisions 294‑230 Excess transfer balance tax (1) If there is an *excess transfer balance period for your *transfer balance account, you are liable to pay *excess transfer balance tax imposed by the Superannuation (Excess Transfer Balance Tax) Imposition Act 2016 for the period. Note: The amount of the tax is set out in the Superannuation (Excess Transfer Balance Tax) Imposition Act 2016. (2) An excess transfer balance period for a *transfer balance account is a continuous period of one or more days during which, at the end of each day, there is *excess transfer balance in the account. (3) Your *excess transfer balance tax is worked out by reference to the sum of: (a) your *excess transfer balance earnings for each day in the *excess transfer balance period; and (b) for each day in the excess transfer balance period that is also a day in the period mentioned in subsection 294‑25(2) (the determination period)—the amount worked out by multiplying the rate mentioned in subsection 294‑235(2) for the day by the sum of your excess transfer balance earnings for each previous day in the determination period. 294‑235 Your excess transfer balance earnings (1) Your excess transfer balance earnings for a day is worked out by multiplying the rate mentioned in subsection (2) for that day by the amount of your *excess transfer balance at the end of that day. (2) The rate is the lower of: (a) the rate worked out under subsection 8AAD(1) of the Taxation Administration Act 1953 for the day; and (b) a rate determined under subsection (3) for the day. (3) The Minister may, by legislative instrument, determine a rate for a day. 294‑240 When tax is payable—original assessments Your *assessed excess transfer balance tax is due and payable at the end of 21 days after the Commissioner gives you notice of the assessment of the amount of the *excess transfer balance tax. Note: For assessments of excess transfer balance tax, see Division 155 in Schedule 1 to the Taxation Administration Act 1953. 294‑245 When tax is payable—amended assessments If the Commissioner amends your assessment, any extra *assessed excess transfer balance tax resulting from the amendment is due and payable 21 days after the day the Commissioner gives you notice of the amended assessment. 294‑250 General interest charge If an amount of *assessed excess transfer balance tax that you are liable to pay remains unpaid after the time by which it is due to be paid, you are liable to pay the *general interest charge on the unpaid amount for each day in the period that: (a) begins on the day on which the amount was due to be paid; and (b) ends on the last day on which, at the end of the day, any of the following remains unpaid: (i) the assessed excess transfer balance tax; (ii) general interest charge on any of the assessed excess transfer balance tax. Note: The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953. 5 Paragraph 306‑10(a) Omit "member". 6 Subsections 307‑5(3), (3A) and (3B) Repeal the subsections. Superannuation Industry (Supervision) Act 1993 7 Subparagraph 38A(ab)(ii) Repeal the subparagraph, substitute: (ii) Division 390; (iii) subsection 136‑80(1); or Superannuation (Resolution of Complaints) Act 1993 8 Paragraph 15CA(1)(c) Repeal the paragraph, substitute: (c) section 390‑5 in that Schedule; or (d) section 390‑20 in that Schedule; 9 Paragraph 15CA(2)(c) Repeal the paragraph, substitute: (c) section 390‑5 in that Schedule; or (d) section 390‑20 in that Schedule; Taxation Administration Act 1953 10 Subsection 8AAB(4) (after table item 15A) Insert: 15B 294‑250 Income Tax Assessment Act 1997 payment of excess transfer balance tax 11 Paragraph 14ZVA(b) Omit "Income Tax Assessment Act 1997;", substitute "Income Tax Assessment Act 1997; or". 12 After paragraph 14ZVA(b) Insert: (c) a determination under subsection 136‑10(1) in Schedule 1 to this Act (about excess transfer balance); 13 Part 3‑20 in Schedule 1 (heading) Repeal the heading, substitute: Part 3‑20—Superannuation 14 Division 133 in Schedule 1 (heading) Repeal the heading, substitute: Division 133—Division 293 tax 15 At the end of Part 3‑20 in Schedule 1 Add: Division 136—Transfer balance cap Table of Subdivisions Guide to Division 136 136‑A Excess transfer balance determinations 136‑B Commutation authorities Guide to Division 136 136‑1 What this Division is about If you have excess transfer balance in your transfer balance account, the Commissioner may require you and your superannuation income stream provider to reduce the total amount of your superannuation income streams that are in the retirement phase. Subdivision 136‑A—Excess transfer balance determinations Guide to Subdivision 136‑A 136‑5 What this Subdivision is about If your transfer balance account exceeds the transfer balance cap, the excess must be reduced by commuting in full or in part your superannuation income streams that are in the retirement phase. If you have more than one superannuation income stream, you may choose which one to commute. Table of sections Operative provisions 136‑10 Excess transfer balance determination 136‑15 Review 136‑20 Electing to commute a different superannuation income stream 136‑25 Notifying Commissioner of transfer balance debits Operative provisions 136‑10 Excess transfer balance determination (1) If you have *excess transfer balance in your *transfer balance account at the end of a day, the Commissioner may make a written determination stating the amount of that excess transfer balance. Note: It is not necessary for the Commissioner to issue a determination under this subsection if the Commissioner becomes aware that you no longer have an excess transfer balance. You are still liable to pay excess transfer balance tax if no determination is issued: see Subdivision 294‑F of the Income Tax Assessment Act 1997. (2) A determination under this section is an excess transfer balance determination. (3) The amount of *excess transfer balance stated in an *excess transfer balance determination is a crystallised reduction amount. (4) The Commissioner may amend or revoke an *excess transfer balance determination at any time before a commutation authority relating to the determination is issued under section 136‑55. (5) Notice of a determination given by the Commissioner under this section is prima facie evidence of the matters stated in the notice. Determination to include default commutation notice (6) A determination made under subsection (1) must include a notice: (a) stating that, if you do not make an election under section 136‑20 within the period specified in that section, the Commissioner will issue one or more commutation authorities; and (b) specifying: (i) the *superannuation income stream provider or providers to whom a commutation authority will be issued; and (ii) the *superannuation income stream or streams that the providers will be obliged to commute in full or in part; and (iii) if more than one commutation authority will be issued—the amount to be stated in each commutation authority, or the method the Commissioner will use to work out the amount to be stated in each commutation authority. (7) A notice included with an *excess transfer balance determination in accordance with subsection (6) is a default commutation notice. 136‑15 Review (1) If you are dissatisfied with an *excess transfer balance determination made in relation to you, you may object against the determination in the manner set out in Part IVC. (2) However, for the purposes of Part IVC, the *default commutation notice does not form part of the taxation decision. 136‑20 Electing to commute a different superannuation income stream (1) This section applies to you if: (a) you receive an *excess transfer balance determination under section 136‑10; and (b) you are the *retirement phase recipient of 2 or more *superannuation income streams. (2) You may elect which of those *superannuation income streams is to be fully or partially commuted for the purpose of reducing the *transfer balance in your *transfer balance account by the *crystallised reduction amount. Requirements for election (3) You make an election under subsection (2) by: (a) identifying the *superannuation income stream or streams to be commuted in full or in part and the *superannuation income stream provider for each such stream; and (b) if you identify more than one superannuation income stream—stating the amount to be commuted from each such income stream. (4) The election must: (a) be in the *approved form; and (b) be given to the Commissioner within: (i) 60 days after the *excess transfer balance determination or amended excess transfer balance determination is issued; or (ii) a further period allowed by the Commissioner. Election is irrevocable (5) An election under this section is irrevocable. 136‑25 Notifying Commissioner of transfer balance debits (1) This section applies to you if you have received an *excess transfer balance determination. (2) You may notify the Commissioner in the *approved form of the amount of a *transfer balance debit that arises in your *transfer balance account if the debit arises in the period: (a) beginning when the determination is made; and (b) ending at the earlier of: (i) the time you made an election under section 136‑20; and (ii) the end of the period within which an election under section 136‑20 may be made. Subdivision 136‑B—Commutation authorities Guide to Subdivision 136‑B 136‑50 What this Subdivision is about The Commissioner must issue a commutation authority to a superannuation income stream provider, unless you have notified the Commissioner that you have already reduced your excess transfer balance by the crystallised reduction amount. A superannuation income stream provider will usually be required to commute the superannuation income stream stated in the authority. Table of sections Obligations of Commissioner 136‑55 Issuing of commutation authorities 136‑60 Varying and revoking a commutation authority 136‑65 Issuing further commutation authorities 136‑70 Notifying of non‑commutable excess transfer balance Obligations of superannuation income stream providers 136‑80 Obligations on superannuation income stream providers 136‑85 Notifying the Commissioner 136‑90 Notifying you Obligations of Commissioner 136‑55 Issuing of commutation authorities Commutation authority must be issued if there is a commutable amount (1) The Commissioner must issue a commutation authority under this section to one or more *superannuation income stream providers if: (a) an *excess transfer balance determination has been issued to you; and (b) the excess transfer balance determination has not been revoked; and (c) the period mentioned in subsection 136‑20(4) has ended; and (d) an amount (the commutable amount) greater than nil remains after reducing the *crystallised reduction amount by the sum of any *transfer balance debits notified to the Commissioner under section 136‑25. Issuing in response to a valid election (2) If you have made a valid election under section 136‑20, the Commissioner must issue a commutation authority under this section to each *superannuation income stream provider identified in your election. (3) If the total of the amounts stated in your election under section 136‑20 falls short of the commutable amount, the Commissioner must also issue a commutation authority to one or more *superannuation income stream providers specified in the *default commutation notice. Issuing if you do not make a valid election (4) If you have not made a valid election under section 136‑20, the Commissioner must issue a commutation authority to each *superannuation income stream provider specified in the *default commutation notice. Requirements for commutation authority (5) Each commutation authority must: (a) specify the *superannuation income stream that the *superannuation income stream provider is to commute, in full or in part; and (b) state the amount (the reduction amount) by which the superannuation income stream is to be reduced; and (c) be dated; and (d) contain any other information that the Commissioner considers relevant. (6) The total of all reduction amounts stated in commutation authorities issued under this section relating to an *excess transfer balance determination must not exceed the commutable amount. 136‑60 Varying and revoking a commutation authority The Commissioner may vary or revoke a commutation authority at any time before the Commissioner receives a notice under section 136‑85 relating to the commutation authority. 136‑65 Issuing further commutation authorities (1) The Commissioner may issue a commutation authority under this section to one or more *superannuation income stream providers under this section if: (a) a commutation authority (the original commutation authority) was issued under section 136‑55; and (b) the *superannuation income stream provider to which the original commutation authority was issued: (i) paid a *superannuation lump sum that fell short of the reduction amount stated in the original commutation authority; or (ii) did not comply with the original commutation authority. (2) A commutation authority issued under this section must include the matters set out in subsection 136‑55(5). (3) The Commissioner may issue a commutation authority under this section to any *superannuation income stream provider of a *superannuation income stream of which you are the *retirement phase recipient. (4) The total of all reduction amounts stated in commutation authorities issued under this section relating to an *excess transfer balance determination must not exceed the difference between: (a) the commutable amount mentioned in subsection 136‑55(1); and (b) the sum of: (i) any *superannuation lump sums notified to the Commissioner under section 136‑85 in respect of the determination; and (ii) any *transfer balance debits arising in your *transfer balance account under item 5 of the table in subsection 294‑80(1) of the Income Tax Assessment Act 1997 because of any original commutation authority. 136‑70 Notifying of non‑commutable excess transfer balance (1) The Commissioner must notify you in writing if, at the end of a day after the Commissioner has issued an *excess transfer balance determination to you: (a) the sum of all *transfer balance debits arising in your *transfer balance account since the determination was issued falls short of the *crystallised reduction amount; and (b) you have *excess transfer balance in your transfer balance account; and (c) either: (i) the only *superannuation income streams of which you are a *retirement phase recipient are *capped defined benefit income streams; or (ii) you are no longer a retirement phase recipient of any superannuation income stream. Note: A debit arises in your transfer balance account when the Commissioner issues a notice under this section: see item 7 of the table in subsection 294‑80(1) of the Income Tax Asse