Federal Budget / Pensions / Professionals / SMSF / SMSF Compliance

Unpacking the pension reforms

The Government has released for public consultation the second round of exposure draft legislation (and explanatory material) to implement key superannuation measures announced in the 2016-17 Federal Budget.  This release of information included:

  • The introduction of a $1.6 million transfer balance cap and transitional arrangements for individuals who already have retirement phase balances above $1.6 million;
  • Reforming the taxation of concessional contributions (i.e. lower the Division 293 tax income threshold to $250,000 and reduce the concessional contributions cap to $25,000);
  • Allowing for catch-up concessional contributions for those with balances less than $500,000 (now effective from 1 July 2018);
  • Removal of regulatory barriers to innovation in the creation of retirement income stream products (does not relate to SMSFs);
  • Improving the integrity of transition to retirement income streams; and
  • Removal of the anti-detriment provision.

I conducted a webinar yesterday to help understand the key measures from this second tranche of reforms, focusing predominantly on the implications of the $1.6m transfer balance cap and integrity measures for TRIS.

You can watch this webinar recording below:


 

With approximately 300 people who joined me online for this webinar, I’ve had a significant number of questions from the session that will be converted into a Q&A podcast and/or Facebook ‘live’ event in the coming days.  If you have a question, please feel free to comment below and I will include this in the podcast and other ‘live’ events.

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One thought on “Unpacking the pension reforms

  1. Thanks Arron, a good overview.

    A few points that are unclear to me.

    A)
    To clarify the CGT aspects, do you have a view of the following?

    A SMSF, in retirement phase, has $2 of shares on one company, with a current CG of 80%. Under the new proposed rules segregation is no longer allowed so the proportional process will be used.

    On 29/6/2017 $400k is allocated to accumulation phase, and the cost base is reset to current share price. I assume that in order to achieve this from an administration point of view the cost base is reset in both accounts, albeit zero impact on the retirement account.

    The $400k worth in the new accumulation account – do these shares need to be sold within 10 years in order to retain the new cost base.

    B) The case of someone who becomes eligible to commence a retirement phase between now and 30/6/2017, and with a current balance over $1.6m, and holding same shares with an existing CG of 80%. One assumes there is a window to transfer to retirement phase with 100% of assets, and 29/6/17 transfer excess back to accumulation and lock in the CGT free kick.

    C) Lumpy assets. If the person in A above had a $2m single property or another asset where there is not a liquid daily price – would they have to have an independent valuation performed? This may allow some variation as to a properties valuation, if one can find a valuer that is despondent on property prices.

    Thanks again for your most valued information.
    Rgds

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