Insights / January 9th, 2017

Tax Brief - Choose it or lose it? New transfer balance cap measures

As many would be aware, the new transfer balance cap measures require all affected members to commute their pension balances in excess of $1.6m before 30 June 2017. The commutation can be internal (by transferring amounts from pension phase to accumulation phase) or external (by the member taking a lump sum from the fund).

The good news is that in making the necessary choices, the superannuation fund trustee can claim a market value cost base for the assets that are subject to the commutation.

Different planning techniques are available for trustees, depending on whether the SMSF has adopted a segregated assets approach or a proportionate approach to the fund’s tax treatment in the “pre-commencement period”. That is, the period between 9 November 2016 and 30 June 2017. The approach adopted by the trustee will affect valuations, timing and the specific tax outcomes.

Whilst many funds generally adopt a proportionate approach, it is significant to note that any superannuation funds that only have members in pension mode throughout the pre-commencement period will be, in effect, treated as adopting a segregated assets approach.

Identifying the choices available and the specific assets involved will be critical to complying with the new transfer balance cap measures and achieving optimal outcomes.

Cowell Clarke has invested significant resources in ensuring that its clients are well prepared for making informed choices. If you or your clients currently have a pension account balance of more than $1.6 million or are considering.

Related Expertise