Annualised notional earnings on excess transfer balance – definition

annualised notional earnings on excess transfer balance has the meaning given by section 294‑215 of the Income Tax Assessment Act 1997 (“ITAA 1997“)

“annualised notional earnings on excess transfer balance” for a financial year is the sum of your notional earnings on excess transfer balance for each day in the financial year on which, at the end of the day, you had excess transfer balance in your transfer balance account:

Notional earnings on excess transfer balances

  • An excess transfer balance arises when an individual’s transfer balance account exceeds their personal transfer balance cap on a particular day. [Schedule 1, Part 1, item 3, section 294-30 of the ITAA 1997]
  • Notional earnings accrue on excess transfer balances. Notional earnings accrue daily and are generally credited towards an individual’s transfer balance account. This means notional earnings compound daily until the breach of the transfer balance cap is rectified or the Commissioner issues a determination. [Schedule 1, Part 1, item 3, item 3 in the table in subsection 294-25(1) and subsection 294-220(1) of the ITAA 1997]
  • The rate at which notional earnings accrue is based on the general interest change (sic). [Schedule 1, Part 1, item 3, subsection 294-220(2) of the ITAA 1997]
  • The daily rate is worked out as follows:

90 Day Bank Accepted Bill yield + 7 percentage points divided by the number of days in the year

  • The 90-day Bank Accepted Bill yield is the benchmark indicator for short-term interest rates. For example, during the 2015-16 financial year, the general interest charge averaged 9.2 per cent per annum. The indicator is published by the Reserve Bank of Australia.
  • A treasury portfolio minister may vary the daily rate downwards by legislative instrument. [Schedule 1, Part 1, item 1, subsections 294-220(2) and (3) of the ITAA 1997]and (3) of the ITAA 1997]

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