Most people are aware of the sweeping changes to superannuation coming into effect on 1 July this year. However, many SMSF trustees don’t fully understand the implications and opportunities.
Outlined below are three areas requiring attention from SMSF members with balances exceeding $1.6 million.
1. $1.6 million pension cap
From 1 July the maximum amount a retiree can use to commence a pension is $1.6 million. Individuals with existing pension balances exceeding this amount will be required to reduce their balance to $1.6 million by 30 June. This cap applies to an individual’s aggregate balance across all of their pension funds.
- Review options to equalise balances between spouses
- Withdraw excess or retain inside superannuation? Analysis required
- Re-structuring your fund tax effectively
- Best way to organise your future cash flow needs
2. Transitional Capital Gains Tax (CGT) relief
This is one of the least understood, but potentially most valuable opportunities. SMSF’s who have retiree members with pension balances exceeding $1.6 million have the option to re-set the cost base of assets within their fund, potentially reducing future tax liabilities.
- A once off “use it or lose it” voluntary election to reset the cost base of fund assets
- Election must be made on or before lodgement of the 2016/17 tax return
- Ability to “cherry pick” the assets which have a cost base re-set
- Detailed analysis required on how to best apply this concession to your situation
3. Estate planning review
Historically most couples established their pensions as reversionary to the surviving spouse. This was fine in the old world, however a re-think may now be required, as each spouse will be constrained by the $1.6 million cap (including amounts received from a deceased spouses’ superannuation balance).
- Review your estate plan, including your will and superannuation death benefit/reversionary pension nominations
Retirees with superannuation balances exceeding $1.6 million will be required to take definitive action by 30 June.
Whilst the majority of legislative changes remove or reduce tax concessions it’s critical to take advantage of the available opportunities.
Obtaining professional advice is the first step to ensure your affairs are organised most efficiently.
ACADIA WEALTH ADVICE – BIG FIRM EXPERTISE, BOUTIQUE SERVICE
This information is general advice and does not take into account any person’s objectives, financial situation or needs. Consider whether the advice is right for you before making a decision