$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.

General Advice Warning:

Information provided on this website is general in nature and does not constitute financial advice. Every effort has been made to ensure that the information provided is accurate. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial adviser to take into account your particular investment objectives, financial situation and individual 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’s skills in self-managed super to provide both the accounting and strategic advice solutions for clients. Her many years working with business owners on their SMSFs has meant that she understands the value of including their superannuation in a business owners overall financial plan.

Her passion is to assist client’s in taking control of their future, through supporting them in making decisions in relation to the self-managed fund and their retirement. Megan regularly provides advice in relation to investment structuring, SIS compliance as well as pension and retirement planning.

Megan has also provided specialist support in relation to estate planning, family law disputes and compliance issues. She is a member of the SMSF Association Queensland Community, and a valued member of the network of SMSF specialists.

Megan Kelly is an authorised representative [No. 1240833] of Hunter Green Pty Ltd AFSL 225962. Your Adviser may offer you services through Depot Superannuation Pty Ltd which is a separate business. Although the same Adviser may offer you services under the above businesses, each business is solely and separately responsible for the advice they each provide. In particular, Hunter Green is only responsible for the financial planning services provided by Megan Kelly.

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