How Can We Help?

Categories
Article contents

TBAR – legislation

The Federal Government introduced legislation in the 2016-7 budget to limit the tax exemption for assets funding superannuation pensions.

The legislated changes come into effect on 1 July 2017.

This legislation sets a ”Transfer Balance Cap” (TBC), limiting the amount a superannuation fund member can transfer into a tax-free pension-phase account.

The Law Summarised

Effective from 1 July 2017, the maximum amount that can be transferred is $1.6 million per individual member. Therefore, members whose account balances exceed $1.6 million must, from July 1, 2017, limit the total value of assets in any Pension Account to $1.6 million. Any balance above $1.6 million may be retained in an Accumulation Account.

Fund members already in retirement phase and having pension account balances in excess of $1.6 million as at July 1, 2017 have two choices. They may:

  • Transfer the balance above $1.6 million into an accumulation account within their existing superannuation fund, or via roll-over to another fund; OR
  • Withdraw the excess above $1.6 million

The ATO will impose penalties on any member whose balance exceeds $1.6 million as at July 1 2017 and who does not take steps to reduce the balance to the legal limit.

Special provisions have been made for individuals with Defined Benefit or Market Linked pensions that have commutation restrictions.

Special CGT relief provisions will apply for individuals transferring assets from a pension account to an accumulation account.