As you know, the superannuation reform announced in the 2016 Federal Budget has been largely implemented. We have busy working with our clients to address all their concerns and working with them to ensure that no rock is left unturned when it comes to their personal circumstance. In regards to the $1.6 million transfer balance cap, there has been an update that we would like to share with you. There are some adverse tax consequences that need to be avoided.
The update on transfer balance cap
If the total value of a superannuation fund member’s pensions exceeded $1.6 million on 1 July 2017, they may face adverse tax consequences. However, there is a transitional provision that permits a minor excess over $1.6 million to be ignored, subject to certain conditions being met.
Basically, this will be satisfied if the value of their pension interests on 1 July 2017 exceeded $1.6 million by no more than $100,000 (i.e., their total value did not exceed $1.7 million), but the member is able to commute the pension(s) by an amount that is at least equal to that excess no later than 31 December 2017.
This will mean that no ‘transfer balance cap’ consequences arise (e.g., no ‘excess transfer balance earnings’ will accrue on the excess and no ‘excess transfer balance tax’ will become payable).
Therefore, it is important that this issue is identified and, if applicable, dealt with promptly.
Please contact us if you believe this may affect you and you need more information.