The changes to superannuation announced in the 2016 Federal Budget have been passed by Parliament with the majority of reforms taking effect on 1 July 2017. One significant change relates to the introduction of the transfer balance cap (TBC), now at $1.7 million and the limit this imposes on the amount of capital that an individual can use to support a pension in retirement phase.
To date, the prominent headlines relating to the TBC have targeted people in or approaching retirement with less focus on how the TBC impacts on what happens to your superannuation if you die. The introduction of the TBC applies to pensions paid to your dependants after you die (called death benefit pensions or reversionary pensions) meaning it has a substantial impact on estate planning.
The main changes that you need to plan for in the event of death include:
Given the significant shift in the landscape with respect to SMSFs and estate planning, we also strongly recommend that trustees have their SMSF trust deed reviewed to ensure maximum flexibility when dealing with excess TBC amounts, rollover of death benefits, reversionary pensions and child pensions. This should be done alongside the review of any binding death benefit nomination(s) you have in place to ensure that they too are valid and provide the certainty in how your death benefits will be dealt with upon your death.
The payment and tax treatment of death benefits paid from an SMSF has traditionally been a complex area, with the need to obtain advice from a specialist. With the recent introduction of the TBC, the need for specialist advice is ever so important.
How can we help?
If you would like to understand how the Government’s introduction of the TBC will affect your superannuation and succession plans, please feel free to give me a call on 08 8232 10 29 and Eileen will book you in to arrange a time to meet. Here we can discuss your particular estate planning requirements in more detail.
For further information, please visit the SMSF Association’s Trustee Knowledge Centre (http://trustees.smsfassociation.com/) to keep on top of the latest changes and information to reach your retirement goals and get the most out of your self managed super fund.
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Address: Suite 1003/147 Pirie St, Adelaide SA 5000, Australia
Phone: (08) 8232 1029
Fax: (08) 8312 6037
David Nelson and The Money Matrix Advice Pty Ltd (ACN 603 049 083) trading as The Money Matrix (ABN 62 603 049 083) Authorised Representatives of Synchron AFS Licence No 243313. Unless specifically indicated, the information contained in this email is general in nature and does not take into account your personal situation. You should consider where the information is appropriate to your needs, and where appropriate, see personal advice from a financial adviser. Authorised Representative of Synchron AFS Licence No. 243313.