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Glenhenz(Initiate)Initiate
12 Mar 2024

Grateful if someone could advise details on the methodology used to calculate the asset value for a defined benefit pension that is assigned to the reversionary beneficiary on the death of the primary beneficiary. This asset value is used to determine whether, after reversion, the reversionary beneficiary meets the requirements for the Transfer Benefit Cap (now $1.9m). It appears that it will also be used to determine whether the reversionary beneficiary exceeds the Total Superannuation Balance. My super fund won't answer the question. Please ignore my previous query (earlier today) on this issue.

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1,314 views
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TobyJDodd(Devotee)Registered Tax Professional
12 Mar 2024

Hi @Glenhenz


Its generally a 3 step process


1) Work out the daily rate. Take a payment, divide by the number of days in the period, (i.e) if you are paid fortnightly divide by 14


2) Times the daily rate by 365 to get the annual rate.


3)Find the estimated asset balance for TBC by multiplying the annual rate by 16 or if it’s a market linked or non commutable

life expectancy pension multiply by the remaining term.


Toby

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Most helpful reply

TobyJDodd(Devotee)Registered Tax Professional
12 Mar 2024

Hi @Glenhenz


Its generally a 3 step process


1) Work out the daily rate. Take a payment, divide by the number of days in the period, (i.e) if you are paid fortnightly divide by 14


2) Times the daily rate by 365 to get the annual rate.


3)Find the estimated asset balance for TBC by multiplying the annual rate by 16 or if it’s a market linked or non commutable

life expectancy pension multiply by the remaining term.


Toby

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Glenhenz(Initiate)Initiate
13 Mar 2024

Hi Toby, thanks for this. The calculations you have given me are used to calculate the estimated asset value (for TBC and TSB purposes) of the pension in the hands of the primary beneficiary. The value I am looking for is the asset value (for TBC and TSB purposes) of the reversionary pension in the hands of the reversionary beneficiary. Intuitively, one would expect that, if the reversionary beneficiary receives, for example, 60% of the primary beneficiary's pension, then only 60% of the asset value (for TBC and TSB purposes) would be assessed against the reversionary beneficiary. However, things are not always what one would expect.


Let me give an example.


Fred has a pension of $60,000 which the ATO assesses as having an asset value of $1,000,000. Fred dies and the pension reverts to Lisa with Lisa receiving 60% of Fred's pension, ie an annual payment of $36,000. Presumably, after reversion an asset value of $600,000 would now be assessed against Lisa's TBC and TSB.


But who knows what value the ATO would come up with in its wisdom.

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