This year’s release marks the 20th edition of our Australian Master Financial Planning Guide. To mark this milestone, we are releasing a series of articles giving you exclusive insight into significant changes covered in key chapters from the Guide.
Chapter 15 Planning to retire
- From 1 July 2017, the amount that can be rolled over to start an income stream is limited to the pension balance transfer cap of $1.6 million (for 2017/18).
- Clients with superannuation balances below $500,000 will be able to carry forward any unused concessional contribution cap for up to five years from 1 July 2017.
- From 1 July 2017, employees may elect to claim a tax deduction for personal superannuation contributions rather than salary sacrifice if they wish. Previously generally only self-employed persons could claim a tax deduction.
- The earnings in a transition to retirement income stream are no longer tax-free. From 1 July 2017, the earnings are taxed at 15% in the superannuation fund.
Chapter 16 Retirement income streams
- Significant changes have been made to the taxation rules and strategy implications for superannuation income streams from 1 July 2017.
- From 1 July 2017, the pension age increases to 65.5 (for anyone born on or after 1 July 1952) and is gradually increasing up to age 67 by 1 July 2023.
- There has been a recent focus on income stream product development, with the government releasing draft superannuation regulations in March 2017.
- From 1 July 2017, the amount that can be rolled over from the accumulation phase of superannuation into the tax-free retirement phase to pay an income stream is subject to the transfer balance cap ($1.6m for 2017/18).
- If the value of a person’s transfer balance account exceeds the transfer balance cap, the excess amount needs to be withdrawn from the pension phase, otherwise tax is payable on the notional earnings. A new example has been added.
- Defined benefit rules are impacted by the transfer balance cap, but modified rules apply, it is usually not possible to commute part of the income stream to comply with the cap. A new case study has been included.
- From 1 July 2017, the earnings generated on assets used to support a transition to retirement (TTR) pension are taxed at 15%. This may reduce the strategic advantages for people are still working full-time.
- From 1 July 2017, income payments received from a superannuation income stream cannot be classified as lump sums for tax purposes.
- Changes have been made affecting the commutation of a death benefit income stream.
- When a child receives a death benefit income stream upon the death of a parent, they will have a transfer balance account set up to assess the value of the income stream. However, a modified transfer balance cap applies instead of the general transfer balance cap.
- The impact of the new transfer balance cap on death benefit income streams is explored.
For more insights from the 2017/18 Australian Master Financial Planning Guide, read more articles from the series: