A taxpayer is being obliged to pay an amount of excess transfer balance (ETB) tax, even though he took active steps to reduce his pension account balance to be under the cap by following the directions he believed to be instructional on the ATO website.

In a case that has just been decided by the AAT in favour of the ATO (Lacey and Commissioner of Taxation (Taxation) [2019] AATA 4246), the applicant, Ray Lacey, had received notice that his pension account was over the $1.6 million transfer balance cap (TBC) and that he needed to reduce that balance to avoid ETB tax. He took steps to do so, which were to transfer a certain amount into his accumulation account and then rely on regular pension drawdowns to take care of the rest.

In doing so, Lacey had relied on an ATO webpage dealing with these matters. Unfortunately that webpage had used the word “remove” rather than the more accurate term “commute” (more below). Also unfortunate was that the transitional arrangement period the ATO had put in place for the transfer balance account rules to settle in had just passed (30 June 2017), meaning that certain specified TBC “events” were required when managing the cap. Readmore