04 Apr 2017
Does the $1.6 million super pension cap affect you?
From 1 July 2017 members with superannuation in pension phase are subject to a $1.6 million transfer balance cap. This means that:
• The maximum amount a member can have in pension phase is $1.6 million (across all super accounts).
• Amounts above $1.6 million need to be withdrawn from the fund or commuted back to accumulation phase.
• If funds greater than $1.6 million are left in pension phase, additional tax will be levied on the excess amount.
• Earnings on amounts in pension phase remain tax free, whilst those in accumulation phase are taxed at 15%.
John has $1.8 million in pension phase in super split between two funds, $1.4 million in fund A and $400,000 in fund B. To comply with the changes, John applies to fund B to commute $200,000 back to accumulation phase before 1 July 2017.
This ensures that John’s remaining pension balance across both funds of $1.6 million is tax free and that no excess transfer tax is levied.
Please note special rules apply to defined benefit pensions.
Should you wish to discuss your pension obligations please feel free to contact Andrew Marshall or Janine Orpwood on 5427 8100 for an initial consultation.