There are many changes from 1 July 2017, which includes the introduction of a $1.6 million cap on the total amount that can be transferred into the tax-free retirement phase for account-based pensions.
Generally, these pensions are provided by retail and industry superannuation funds, but they may be provided by other funds, including self-managed super funds (SMSFs). Defined Benefit Pensions such as those provided for some Federal and State government employees are also impacted by the cap.
The general transfer balance cap will be indexed in $100,000 increments in line with CPI. Indexation will be applied proportionally where a member is a retirement phase income stream recipient, but has not at any time met or exceeded their cap.
Australians in pension phase before July 2017
If you have more than $1.6 million of superannuation in pension phase (called retirement phase from 1 July 2017), or you expect to have more than $1.6 million in pension phase by July 2017, then you need to take action before July 2017.
Anyone with more than $1.6 million of super in retirement phase as at 1 July 2017, will be forced to withdraw the excess over the $1.6 million from pension phase, and an excess transfer balance tax will also apply (although there will be a grace period of 6 months for amounts in excess of $1.6 million, providing the excess is less than $100,000).
If your super pension balance (from all pension accounts) does exceed $1.6 million, you have two options when reducing your super pension balance to below $1.6 million before July 2017.
You can move the excess into accumulation phase within the super system (where earnings will be taxed at 15%), or you can withdraw the excess from the superannuation system.
If you have a self-managed super fund (SMSF), such a requirement does not mean physical movement of assets from retirement phase to accumulation phase, but will generally require specific recording and reporting obligations.
As super balances increase, and the cost of a reasonable lifestyle in retirement increases, many will need to be mindful of monitoring their superannuation.
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This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.