$1.6m cap on tax free pensions

[ Clearing up the myths ]
by Megan Kelly Published

Many of our clients will be impacted by the $1.6 million cap on tax free pensions commencing on 1 July 2017. There has been a lot of discussion on this impact in the media but there have also been many mixed messages.

We would like to clear up some of these myths:

1. You can still have more than $1.6million in super

If you have more than $1.6million in super, you do not have to take any money out of super to comply with the new rules. You do, however, need to restructure your superannuation within your fund to reduce the amount in pension account back to $1.6million.

2. If you have over $1.6million in a pension, there is a negative impact of doing nothing.

There is a greater cost if you just sit back and do nothing. There is a new penalty tax on earning on the amount over $1.6million if you leave it in your pension account. You will ultimately be forced to act by the ATO but waiting for them to initiate this action will incur the penalty tax and will ultimately leave you worse off.

3. It’s not all bad news

While only $1.6million in super can be tax-free, anything above this amount will only be taxed at 15%. For most clients, the benefits in maximising the amount you hold in super are still there and your superannuation should not be ignored.

If you do have over $1.6million in super or are close to this amount, there are a number of actions you need to take before 30 June 2017 and time is of the essence.

a. You need to bring your self-managed super fund accounts up to date now! Many funds are still preparing their accounts on an annual basis. This is going to disadvantage them leading into 30 June 2017 because:

  • The don’t know if they are over or how far over the $1.6million they are
  • They can’t get accurate personalised advice until they do know their super balances
  • They won’t be ready for real time reporting, which the ATO will require to administer the new rules.

b. Depending on your fund and its investments you may need to:

  • Update you super fund trust deed
  • Obtain valuations on unlisted or property assets owned by the fund
  • Review your estate planning [ we will have a follow up blog to discuss the estate planning impact in more detail ]

These changes to superannuation will impact everyone differently based on their personal circumstances. At Superannuation Depot, we are there to guide you through these changes to ensure that you maximise your wealth and retirement opportunities.

We are a licensed self-managed super fund specialist and are ready to give you personalised advice to deal with the superannuation changes. 

Get in touch with Megan Kelly or Michael Garrone to discuss your personal situation or you can contact the super team at [07] 3193 3000.

Disclaimer

Information provided in this blog and on this website is general in nature and does not constitute financial advice. Every effort has been made to ensure that the information is accurate, but information may become outdated as legislation and new government announcements are made. Individuals should not rely on this information to make a financial investment decision as it does not take into account their personal circumstance. Before making any decisions, we recommend you consult a licensed adviser to consider your particular financial situations and needs.

Depot Superannuation Pty Ltd is a corporate authorised representative [No. 1240831] of Hunter Green Pty Ltd AFSL 225962.


Megan Kelly
read more by Megan Kelly

Megan has extensive experience in the specialist area of self-managed superannuation funds advising a wide range of clients whose situation vary from business owners setting up their own self-managed superannuation funds through to retiree's and inter generational wealth planning.

Megan's specialties include retirement planning, Superannuation Industry Supervisory compliance (SIS), investment rules for superannuation, strategic advice, fund audits and estate planning. Megan is aSpecialist Superannuation Advisor with the SMSF Professionals Association of Australia (SPAA), the leading professional body for SMSFs. She regularly attends the SPAA discussion groups where they discuss recent changes in superannuation and make proposals to government about these changes.

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