From 1 July 2017, the amount the Members will be able to transfer into the tax exempt pension phase of superannuation will be capped at $1.6 million.
Any amounts in excess of the cap will need to be transferred out of the tax exempt pension phase, either back to the accumulation phase (earnings taxable at 15%) or out of the superannuation system entirely as a lump sum. Although transfers to the tax exempt pension phase will be limited to $1.6 million, there are no restrictions on how much a Member can continue to hold in the accumulation phase. If your pension balance is over $1.6 million, you will need to make a request to convert part or all of your pension accounts into accumulation phase to ensure that your total pension balance does not exceed $1.6 million. You can download the minute template by clicking on the button below:
If your total pension balance is over $1.6 million, you will not be able to use the segregated method for the SMSF’s assets. For more information, please see the Tax Office guidelines here. Members whose transfer balance cap is close or over the $1.6 million cap might receive a letter from the ATO similar to the sample below:
If you have a pension balance of over $1.6 million, you will need to purchase an actuarial certificate to determine which portions of the SMSF are taxed at 15% and which portions are tax free. For more information on actuarial certificates, please click on the button below: