The super changes advocated in the May 2016 budget and subsequently revised in September 2016 – has now been passed.

This is the last in a series of articles dealing with the changes and how they may impact you.

In the first article we addressed concessional contributions and the second article addressed non-concessional contributions.

This 3rd article is intended to explain the amount that can be transferred from the Accumulation phase of Superannuation to Pension mode.

From 1 July 2017 the maximum that can be transferred from the Accumulation phase of Superannuation is $1.6m.

Some points to consider:

  • The $1.6m balance cap is measured as at 30 June of the preceding tax year, and comprises the aggregate balance of all of the member’s superannuation funds.
  • From 1 July 2017 up to $1.6m may be transferred or remain in Pension. This amount will be known as the ‘Transfer Balance Cap’. This amount:

– Will be reduced by pension payments and may not be topped up from Accumulation.

– Can be increased by market growth.

  • The vast majority of investors who have a balance around this level have a SMSF. There are on average 2 investors in most SMSFs so the total cap is therefore $3.2m – although the member’s component balance is significant and relevant, as the legislation is at a member level and not an aggregate level. So it’s critical to consider the ownership of the underlying investments especially when it comes to property. The treatment of unsegregated assets is beyond the scope of this article and you should seek personal financial advice.
  • The type of assets included in the ‘Transfer Balance Cap’ are critical as long term capital gains free assets will be preserved – as well as tax free earnings. There are certain specific rules pertaining to the capital gains treatment of assets that are required to be transferred back to Accumulation phase (ie the assets in excess of $1.6m).
  • You should obtain personal financial advice on the process and capital gains consequences before you decide on which assets to transfer from pension to accumulation phase within your Superannuation account.

From 1 July 2017 those people who are currently in TTR pensions (Transition to Retirement) will pay tax on their earnings at 15%, and also pay capital gains tax on any assets sold as if these assets were in the Accumulation phase within Superannuation.

This will apply to any person under the age of 65 and still working.