Superannuation Reforms – impact for those with more than $1.6 Million in Superannuation
On 23 November 2016 legislation to implement the Government's superannuation reforms proposed in the May 2016 budget were passed by both houses of Parliament. .Under this legislation from 1 July 2017 there is now a $1.6 Million superannuation pension balance cap that will limit the amount you can have in your fund in the retirement (pension) phase.
What do those with more than $1.6 Million in superannuation need to consider prior to 30 June 2017:1. Check your superannuation account balance
To calculate your superannuation balance you needto add all balances that you have in Superannuation Funds, not just your SMSF. If you have a non-account based pension (eg. defined benefit pension) these are normally valued at 16 times the yearly pension amount.If a fund member has a balance of more than the $1.6 million transfer balance cap & they are in pension mode then by 1 July 2017, that person must:
There are complicated transitional rules to allow members to realise capital gains using the current (exempt) tax rules without having to sell investments.2. Analyse your fund
If you choose to allocate part of your pension account to an accumulation account or make a lump sum withdrawal, you need to carefully review the Fund’s unrealised gains or losses together with the fund’s tax-exempt position (now and in the future). To ensure the correct values are being used to calculate your superannuation balance compared to the new cap, the SMSF’s investments will also need to be valued leading up to 30 June 2017.
The transitional rules allow 2 methods to calculate Capital Gains Tax (CGT) relief:
i) Segregated method (fund is 100% in pension mode):
ii) Proportional method (fund not 100% in pension mode):
Before 30 June 2017 you should consider the impact of taking excess amounts over the cap out of the Fund. You will need to consider this taking into account your current and expected future personal marginal tax rate.
4. Review your available non-concessional caps
From 1 July 2017 Fund members will not be able to make further non-concessional contributions if they have more than $1.6 million in superannuation. Members will need to consider making contributions before 30 June 2017 before the legislation changes.
5. Spouse balances
A review should be done of each member’s spouses balance and consideration be given to the ability to “even up” superannuation balances.
Australian super - the changes from 1 July 2017
The new super rules are very complicated – the decisions you make now can have a significant impact to future tax implications of your superannuation. To put yourself in the best possible position, arrange for your advisor to review your personal situation.
Important: This is not advice. Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly.
We therefore recommend that our formal advice be sought before acting in any of the areas. This document is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.
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