Here are the facts of the case:
Husband and wife both have $2m pension accounts.
Husband dies 23/02/2024.
Wife gets Reversionary pension from Husband of $2m.
Wife’s TBC as of 01/07/2023 is $1.6m.
My question is do we have to commute $xx m to accumulation so the wife is under the TBC?
Hi Alkesh
Yes, a reversionary pension counts towards the wife's transfer balance cap (TBC). It counts towards the cap 12 months after the death of the husband.
In your example the wife will commute her pension to accumulation and that will count as a debit towards her TBC. The reversionary pension will count as a credit to the TBC.
A good summary of the rules with examples can be found at:
https://www.smsfassociation.com/wp-content/uploads/2017/01/Goto-Guide-1.6-mil-Transfer-Balance-Cap.pdf
Thanks
The Auditors Institute