5 April 2017

The transfer balance cap applies to the total amount of superannuation that has been transferred into retirement phase. The balance of assets in pension phase can be held across several accounts, so the number of accounts is immaterial.

The amount of the lifetime cap will start at $1.6 million, and will be indexed periodically in $100,000 increments in line with consumer price index. The ATO says the amount of indexation you will be entitled to “will be calculated proportionally based on the amount of your available cap space”. It says that if, at any time, you meet or exceed the cap, you will not be entitled to indexation.

Continue reading “Super’s new $1.6m transfer balance cap — what counts towards it?” →

5 April 2017

Recent superannuation reforms introduced a concept of “total superannuation balance”, which on the surface may give the simple impression that it is the sum of the balances of a person’s superannuation interests. However, this is not the case.

What is the total balance relevant for?

The total superannuation balance is relevant in determining a super fund member’s eligibility for:

• making non-concessional contributions according to the non-concessional contributions cap
• receiving the government co-contribution
• the tax offset for spouse contributions
• using the segregated assets method to determine exempt current pension income (ECPI), and
• the unused concessional contributions cap carry forward (this measure comes into effect from July 1, 2018).

Broadly, the first three of the above will not be available to an individual if his or her total superannuation balance is greater than the new general transfer balance cap (set at $1.6 million for the 2017-18 financial year and indexed in $100,000 increments in line with the CPI).

The yet-to-be-initiated unused concessional contributions cap carry forward is going to be tested against a $500,000 total superannuation balance. The test time for this balance is to be set immediately before the start of the financial year in which a fund member seeks to get or access an advantage — for instance, to make a non-concessional contribution.

Continue reading “What is your “total superannuation balance” and why does it matter?” →

8 March 2017

The rules around the valuation of assets held under an SMSF have seen a lot of changes over the years. The requirement to consider valuing SMSF assets at market value when preparing the annual financial statements of the fund was one of the most significant and controversial of these changes.

The use of market value accounting for financial statements is regarded as a good practice, but was not imposed on SMSF trustees as a legal requirement.

Since 7 August 2012, a mandatory requirement by regulation came into force, and now aligns SMSFs with accounting principles. Consequently, for the 2012-13 and later financial years, SMSF trustees are required to use market values for the purpose of preparing year-end financial accounts and statements.

Continue reading “Does Your SMSF Need a Valuation?” →

8 March 2017

From 1 July 2017, there is a limit on how much of your super you can transfer from your accumulation super account to a tax-free “retirement phase” account to receive an account-based pension income.

This is known as the super “transfer balance cap”. If you have more than one super account, the cap applies to the combined amount in all of your pension phase accounts. You will be able to make multiple transfers into the retirement phase as long as you have available cap space.

Continue reading “New Transfer Balance Cap for Pension Phase Super Accounts” →

2 December 2016

Do-it-yourself superannuation, in one form or another, has been around for about 30 years. But it has only been over the last few years that SMSFs have made an indelible mark on Australia’s retirement savings landscape.

The SMSF sector now claims a bigger slice of the super pie than it ever has, in terms of asset values and number of funds. The close to 600,000 SMSFs in the country have an average balance that is generally in excess of $1 million. With more than $594 billion of superannuation assets, SMSFs represent roughly a third of Australia’s total.

This stunning data is contained in the ATO’s statistical report on SMSFs up to the end of December 2015, released in February 2016, so the above figures have only improved since then.

By asset value, SMSFs have now surpassed retail and industry super funds. The regulator of superannuation, the Australian Prudential Regulation Authority (APRA), says retail funds account for around 29% of total superannuation assets, industry funds about 24%, but that SMSFs accounted for the biggest slice – more than 32%.

Continue reading “Is an SMSF right for you?” →

15 October 2016

The new Parliament has released the first batch of proposed changes to the superannuation regime, and among these was the announcement that the proposed $500,000 lifetime non-concessional cap is to be scrapped.   Recall that these measures were previously announced in the Federal Budget earlier this year before the election.

These proposed changes are still in exposure draft form and may be subject to further tweaking.

The government also revealed that:

• the non-concessional contributions cap is going to be $100,000 per year, starting from July 1, 2017 (instead of the current $180,000 cap)
• taxpayers with a superannuation balance of more than $1.6 million will no longer be eligible to make non-concessional contributions from the same date.

Also, some of the previously announced measures will not proceed, and have been postponed or abandoned altogether. These include:

• commencement of catch-up contributions using the unused caps from the prior five years for people with balances of $500,000 or less is postponed and to start from July 1, 2018
• harmonisation of acceptance of contribution rules for those aged 65 to 74 will not proceed at all.

The proposed rules that remain intact and will continue:

• the rule allowing fund members to “bring forward” three years’ worth of non-concessional contributions for individuals aged under 65, and
• the requirement to meet the “work test” for individuals over the age of 65 in order to make non-concessional contributions.

Continue reading “Controversial super change scrapped — but other proposals need to be watched” →