INVESTING SUPERANNUATION
Make
sure the
cap fits
R
etirees need to keep an eye on their
superannuation balance before the
government’snewlimitscomeinto
effectonJuly1thisyear.Ifaretiree’s
pension exceeds $1.6 million, they
must either sweep the excess into an accumulation
accountoreventakeitoutofthesupersystem.Ifthey
don’t they could be hit with higher taxes.
The excess can remain in the accumulation fund but
earningswillbetaxedat15%,whereasmoneyinthe
pension phase is tax free.
The problem for retirees, however, is that in certain
circumstances there can be some complications around
the balance transfer cap. So much so that some experts
aredescribingthenewrulesasworsethanthehated
reasonablebenefitlimits(RBLs)thatweredropped
in 2007.
RBLs were complicated and an administrative pain
forfundsandmembers.Theywerecostlyforbothfunds
and members, who needed advice to work out the limits.
There was a celebration when RBLs were dropped.
PeterHogan,headoftechnicalattheSMSFAsso-
ciation, believes that the $1.6 million balance transfer
arrangements are worse than RBLs. There are plenty
of rules from the tax office covering all sorts of tricky
circumstances, such as what happens if a spouse dies
and the retiree inherits their superannuation.
Andwhathappensinthecaseofpensionspaidfrom
adefinedbenefitfund?Youonlyhavetolookatthe
guidelinesfromthetaxoffice.Initsrecent100-page
law companion guidelines on the changes, some 65
pages are devoted to the transfer cap.STORYSUSAN HELYThe changes are keeping technical experts such as
Hogan busy. He is presenting three-hour seminars to
financial planners around Australia outlining what
they mean.
Certainly the new balance transfer rules are an extra
burden for retirees. But most retirees don’t need to
worry about their pension being taxed in retirement.
According to the Australian Bureau of Statistics, the
averagesuperbalanceformenaged65-69is$354,564
andforwomeninthesameagegroupitis$249,183.
But retirees who are lucky enough to have more than
$1.6millionmayneedtoactbeforeJuly1.Justhowmany
retirees have more than $1.6 million is unknown because
theyoftenhavemultipleaccounts.
Hogansaystherehasbeensomeconfusionoverselling
investments but recent clarification from the tax office
explains that retirees don’t have to dispose of anything
betweennowandJune30.Buttheymayhavetomove
assets back into an accumulation account.
Ifyouhaveyourpensionwithanindustryfund,it
can’t do anything without your consent. “The rules say
wemustgetinstructionfromthemember,”saysShane
Mather, head of product and actuarial at Sunsuper. But
rather than wait for members to contact them, industry
fundssuchasSunsuper,RESTandAustralianSuperare
proactively contacting members.
Sunsuper,forexample,istakingathree-pronged
approach. Its financial planners are phoning all membersSuper members with a pension income stream
would be wise to check the numbers
Just how
many
retirees
have more
than $1.6m
is unknown
because they
often have
multiple
accounts