Myth-Busters: Superannuation Reform

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Myth-Busters: Superannuation Reform


With the new superannuation reforms now in effect from 1 July 2017, it is important to separate facts from myths as follows:


MYTH 1: “Members with $1.6m superannuation balance are unable to make concessional contributions”

Incorrect. The $1.6m superannuation balance limit test only applies to non-concessional contributions subsequent to 30 June 2017. In fact, with the abolishment of the 10% maximum earnings restriction*, more taxpayers are able to contribute up to their maximum concessional cap each financial year. 

*No more than 10% of your income (including combined assessable income, reportable fringe benefits and reportable employer super contributions) can come from activities as an employee.


MYTH 2: “Minimum pension requirement will continue to apply on excess balance over $1.6m transferred to accumulation account”

Incorrect. Once the excess balance over $1.6m is transfer back to accumulation phase, it ceases to be a retirement income stream and the member is no longer subject to the minimum pension withdrawal requirement. Depending on your individual circumstances, the reduction in minimum pension requirement maybe beneficial in your overall retirement strategy.    


MYTH 3: “Excess amount transferred to accumulation account is no longer accessible”

Incorrect. Members can still access funds allocated to accumulation account provided that they met the condition of release. Generally, this will be paid as a lump sum benefit rather than an on-going income stream and for members over the age of 60; the payment will continue to be tax-free in their personal income tax return.


MYTH 4: “Pension balance cannot grow beyond $1.6m”

Incorrect. The $1.6m transfer balance cap does not apply to any subsequent growth or losses. Where your pension funds grew beyond $1.6m subsequent to 1 July 2017, you will not exceed your transfer balance cap and earnings on the growth will remain tax-free.

In contrast, you will not be able to ‘top up’ your pension account to supplement any decline in market value subsequent to 1 July 2017.

Should you have any questions in relation to superannuation, please contact us or speak to your ESV engagement partner on 02 9283 1666.