Last week we discussed the top 5 questions to ask about the upcoming super changes. Now we have the top myths from the ATO surrounding the changes to superannuation coming into effect from July 1. Read more now….
MYTH ONE: There will be changes to the non-concessional contributions three year bring‑forward.
This isn’t the case. There are actually no changes to the three year bring‑forward for 2016/17.
Eligible members who have not triggered the three year bring-forward rules in the last two years are still entitled to contribute up to $540,000 by 30 June 2017. If you do this, you will not be able to make any more contributions until 1 July 2019 without triggering excess contributions.
Members who have triggered the bring-forward rules in 2014/15 or 2015/16 still have $540,000 as their total cap from that arrangement. They can contribute any unused remainder amount by 30 June 2017.
Members who have triggered the three year bring ‑forward since 1 July 2014 and who do not contribute the full $540,000 by 30 June 2017 will be subject to transitional provisions from 1 July 2017 that will mean the amount of the bring‑forward will reduce.
MYTH TWO: There will be changes to the tax-free status of a pension.
The change is a new limit on the amount of super you can transfer and hold in a tax-free ‘retirement phase account’, where the investment returns are tax-free.
There is actually no change to the pay as you go (PAYG) withholding status of ordinary account‑based pensions. For members who are over age 60, pension payments will continue to be tax‑free and not subject to PAYG withholdings.
Members receiving non-commutable defined benefit pensions and annuities may be subject to PAYG withholdings.
MYTH THREE: The new transfer balance cap can be shared between couples.
The transfer balance cap is a new limit on the amount of super you can transfer and hold in a tax-free ‘retirement phase account’ to receive your pension income.
From 1 July 2017, this cap is $1.6 million and applies for each member of a couple (with modifications for death benefit recipients), and cannot be shared or aggregated between a couple. For example, one member of the couple cannot have $3 million in retirement phase and the other member have $200,000.
MYTH FOUR: The transfer balance credit amount of an existing term allocated pensions (TAPs) will be determined by the TAP’s account balance
This isn’t the case, because the TAP is a capped defined benefit income stream and different rules are used to determine how the TAP counts towards your transfer balance cap.
Instead, the credit amount is determined as the annual entitlement from the TAP multiplied by the rounded up remaining term, and this will always exceed the actual account balance.
However if your TAP commences after 30 July 2017, the transfer balance credit value will be equal to the value of the account balance.
For more information on the superannuation changes visit ato.gov.au/superchanges
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