We have recently released some new pages detailing the pension-related changes in government regulations and how these changes may affect your SMSF. We have also reviewed and updated the pages on our website to reflect the important super thresholds for the new Financial Year. This page provides a summary of the updates as well as the links to the relevant webpages.
Pension-Related Changes in Government Regulations
When your SMSF has a Retirement Phase Pension, you may need to obtain an Actuarial Certificate to determine the percentage of income earned that can be exempt from tax. From 01 July 2017, your Total Superannuation Balance may affect the requirement for an Actuarial Certificate.
We have provided the definition on what constitutes a Retirement Phase Pension and how the Total Superannuation Balance affects the requirement of an Actuarial Certificate. For more information, please click here.
Transfer Balance Account Report (TBAR)
From 01 July 2017, the Government introduced a $1.6 million cap on the total amount of superannuation benefits that you can transfer into a tax-free Retirement Phase Pension. This limit is known as the Transfer Balance Cap (TBC).
Due to this new Transfer Balance Cap measure, the ATO has imposed a new reporting obligation on SMSF Trustees so as to record and track the movements in the member’s Transfer Balance Cap and apply provisions should the member breach the Transfer Balance Cap (TBC). This new event-based reporting framework is called the Transfer Balance Account Report (TBAR).
For more information on this new event-based reporting framework, please click here.
Death Benefit Pension
When a deceased member’s Super Benefit is distributed as a Pension to the beneficiary, a Death Benefit Pension would be established for the beneficiary which is subject to the Transfer Balance Cap. Accordingly, careful planning is required to ensure that you will not exceed your Transfer Balance Cap when you are receiving Death Benefit as the beneficiary in the form of a Pension.
For more information on the implication of Death Benefit Pension on your Transfer Balance Cap and the options available to avoid exceeding the Transfer Balance Cap, please click here.
Pension and Lump Sum Withdrawals
When you have a Retirement Phase Pension, you have the choice of making either Pension withdrawals or Lump Sum withdrawals. We caution that different rules apply to these two withdrawal types and they may affect your personal tax return, SMSF as well as your Centrelink entitlements.
For more information on the difference between Pension withdrawals and Lump Sum withdrawals, please click here.
Changes in Super Thresholds
Co-contribution Income Thresholds
If your income is within the predetermined thresholds and you make a personal super contribution in a Financial Year, the government will match your contribution with a co-contribution up to certain limits. The income thresholds are indexed for the 2018/2019 Financial Year with the lower income threshold increased to $37,697.
For more information on co-contributions and the eligibilities, please click here.
Low Rate Cap
When you are between your preservation age and 60 years old, the tax on Lump Sum withdrawals made (provided you are eligible) is affected by the low rate cap amount. The taxable component of the amount withdrawn which is below the low rate cap amount is tax free. The low rate cap amount for the 2018/2019 Financial Year has increased to $205,000.
For more information on low rate cap and how it affects the tax payable on Lump Sum withdrawals, please click here.
Catch Up Concessional Contribution
From 01 July 2018, you are able to make 'carry-forward' concessional super contributions if you have a Total Superannuation Balance (TSB) of less than $500,000 at 30 June of the previous Financial Year by accessing the unused concessional contributions cap space. This means that you may contribute above the annual concessional contribution cap if you meet the eligibilities.
The first year in which you can access unused concessional contributions is the 2019-20 Financial Year. Unused concessional contributions carried forward that have not been used after 5 years will expire.
For more information on the Catch Up Concessional Contributions as well as a comprehensive example to illustrate how it works, please click here.