Transfer balance cap: time to consider post-30 June 2017 issues



The introduction of the transfer balance cap measures led to a frantic amount of activity for self-managed superannuation fund (SMSF) advisers and their clients in the lead up to 1 July 2017. In an article excerpted below from the Taxation in Australia journal, authors Daniel Marateo and Peter Slegers CTA seek to demonstrate that it is an opportune time for advisers to consider the ongoing issues associated with the transfer balance cap regime.

Daniel Marateo is a lawyer in Cowell Clarke’s Tax & Revenue and Superannuation practice groups. Peter Slegers is a partner and team leader of Cowell Clarke’s Tax & Revenue and Agribusiness practice groups. Daniel was part of the team assisting Peter and co-author Nicole Santinon in producing the SMSF Income Stream Guide, published by The Tax Institute. 

In the article, Daniel and Peter highlight how, due to subsequent legislative developments and ATO pronouncements, transition to retirement income streams, broader succession planning issues and dual fund strategies have become key areas of focus. They argue that, while there is a need for further clarification and potential for legislative refinement in some areas, it is clear that the transfer balance cap measures are here to stay for the foreseeable future.

The new environment …

Daniel Marateo and Peter Slegers of Cowell Clarke 
With the pre-1 July 2017 planning and compliance activities now in the rear view mirror, it is an opportune time for advisers to consider the ongoing issues associated with the transfer balance cap regime. Some particular areas attracting attention in the post-30 June environment include dealings with transition to retirement income streams, broader succession planning issues and dual fund strategies.

These areas have come into focus in light of subsequent legislative developments and a growing body of ATO pronouncements relating to the new superannuation tax regime.

Transition to retirement income streams

By way of background, a transition to retirement income stream (TRIS) is not, unless specific conditions are met, a superannuation income stream that is in the retirement phase. [1] 

This has two significant consequences:
  • the current pension income exemption no longer applies in respect of a TRIS; and
  • the superannuation interest supporting the payment of a TRIS does not give rise to a credit to a member’s transfer balance account.
Consequently, many non-retirement phase TRISs were either left unadjusted on the introduction of the transfer balance cap measures or were commuted back to accumulation interests.

It is clear that the removal from 1 July 2017 of the earnings tax exemption in respect of a TRIS has decreased the popularity of using a TRIS. That said, advisers should remain alive to the issues and opportunities associated with a TRIS as they may remain a viable option for members in some situations.

The full article covers:
  • The ongoing utility of a TRIS and the circumstances under which a TRIS might be a worthwhile option for members
  • TRIS entering retirement phase – including case studies
  • Succession planning associated with a TRIS, including interactions with account-based pensions and the issues with a reversionary TRIS
  • Succession planning for income streams, including reversionary and non-reversionary income streams and planning choices 
  • Dual fund strategies – including related party acquisition, CGT on asset transfers and documentation, stamp duty, and the general anti-avoidance provisions.
You can download the full article (PDF), which was originally published in the December-January issue of Taxation in Australia, The Tax Institute’s journal for members (find out more about the benefits of membership here).

The SMSF Income Stream Guide, from authors Peter Slegers and Nicole Santinon of Cowell Clarke, explores many of the related practical issues that impact SMSF income streams, such as estate planning laws, asset protection and the strategies for accessing wealth from existing business and investment structures to fund income streams. Find out more on our website.



1 S 307-80 of the Income Tax Assessment Act 1997 (Cth) (ITAA97).

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