Super Reforms Written and Presented by: Con Gotsis FCPA (FPS), CTA, - - PowerPoint PPT Presentation

Super Reforms

Written and Presented by: Con Gotsis FCPA (FPS), CTA, SSA, SSAud, AFP Director, Pascoe Partners Accountants 5th May 2017

Agenda

• Contributions
• Pensions
• CGT Exemption
• Checklist
• Questions

Contributions

CURRENT CONTRIBUTION LIMITS

• Concessional Contribution Caps

– Under 49 at 30 June 16 - $30,000 – 49 or over at 30 June 16 - $35,000

• Non-Concessional Contribution Caps

–$180,000 a year –Under 65 during 30 June 16 - $540,000 over 3 years

CONTRIBUTIONS – Post 30 June 2017

• Concessional Caps

– Under 49 at 30 Jun 17 - $25,000 – 49 and over at 30 Jun 17 - $25,000 – 10% rule abolished

• Non Concessional Caps

– $100,000 a year – Under 65 during 30 June 18 - $300,000 over 3 years – Only available if “TSB" < $1.6m previous 30 June

WHAT IS TOTAL SUPERANNAUTION BALANCE (“TSB’)?

• Accumulation Balance less structured

settlement contributions

• Pension Balance
• Rollovers in transit not included in the above two

Untaxed and Defined Benefit Funds

• Concessional contributions can’t cause an excess

contribution by itself

• It will however limit the ability to make contributions to
• ther taxed funds
• Personal contributions to untaxed funds are not

deductible post 30 June 2017

WHAT NCC CAN BE MADE 2018 FY?

• Use Arial 24 for main body
• No more than 5 main points per slide
• No more than 15 slides for a 45 minute presentation
• Bullet Point 4
• Bullet Point 5

Total Superannuation Balance 30 June 2017 NCC cap for the for the first year Bring forward period Less than $1.4m $300,000 3 years $1.4m to < $1.5m $200,000 2 years $1.5m to <$1.6m $100,000 n/a $1.6m or more $- n/a

NCC TRANSITIONAL RULES - 2018

• Use Arial 24 for main body
• No more than 5 main points per slide
• No more than 15 slides for a 45 minute presentation
• Bullet Point 4
• Bullet Point 5

Total Superannuation Balance 30 June 2017 Year NCC cap Triggered NCC Less than $1.6m 2016 $460,000 less 2016 & 2017 NCC Less than $1.6m 2017 $380,000 less 2017 NCC $1.6m or more 2016 or 2017 Nil for remaining term

Contribution Example

• Eddie aged 60 has $1,000,000 in super. He made

NCCs in 2016-17 of $450,000 and the fund earned $100,000 in that year. Can he make a further NCC in 2018?

Contribution Example

• Eddie’s TSB at 30 June 2017 is under $1,600,000
• BUT bring forward cap clawed back in 2017-18 to

$380,000

• No further NCC can be made in 2017-18 or 2018-19

even though under $1,600,000

• No excess results from $450,000
• Use it or lose it……

Pensions

Transfer Balance Cap

• Tax exemption only available on $1.6M per taxpayer

– Per taxpayer, not per fund

• Excess over $1.6M must either be:

– Rolled back to accumulation; or – Taken as a lump-sum and withdrawn from superannuation

• If an excess arises, notional earnings calculated at 9%

and taxed at 15%

The Transfer Balance Cap Account

Debits (reduce) Credits (increase) Value of lump sum payouts reducing income streams Value of all income stream interests as at 30 June 2017 and new pensions after (Not TRIS’s) Value of income streams that cease Value of reversionary income stream at time person becomes entitled (date of death) Structured settlement payments Loss due to fraud, bankruptcy Family law payment splits Notional earnings that accrue on excess TB amounts

The Transfer Balance Cap Account

• Note earnings and losses are disregarded if the pension

grows no issue with it being more than $1.6m

• Note that pension payments do not decrease the

account balance

• Treating min payments beyond the excess as lump sum

payments will reduce the balance

Transitional Rule

• Transfer balance cap breaches of less than $100,000

that occur on 30 June 2017 do not give rise to notional earnings or an excess transfer balance tax liability if they are rectified within 6 months

What Happens if You Breach the Cap?

• Commutation authority

– The superannuation fund is required to reduce the superannuation income stream within 60 days – Failure to comply will mean the income stream will not be in the retirement phase (ie lose tax exemption benefit)

Defined Benefit Pensions

• Lifetime annuities, complying pensions, market linked

pensions which can’t be stopped until death have different valuation rules

• Cannot create a excess transfer balance amount on its
• wn, value calculated to:

– Determine if other member pensions exceed the cap – Assess member TSB

Defined Benefit Pensions

• Taxed defined benefit arrangements - half of any

pension income over $100,000 is included in the recipient’s assessable income and taxed at the individual’s marginal rates

• Untaxed defined benefit arrangements – 10% offset

limited to the first $100,000 of benefit received

Death Benefit Pensions

• Deceased’s balance must be paid via a pension or lump

sum after death

• What happens if the death benefit pension causes an

excess beyond $1.6m for the survivor?

• Twelve month period of grace where excess is counted

but won’t require action

– only where the deceased’s pension reverts automatically – all other cases will be treated as a new pension

Death Benefit Pensions

• To reduce an excess transfer balance to the survivor you

could choose to roll back their own income stream to get under the limit

• If there is no choice but to roll back the deceased’s

pension, the commuted amount must be paid out of the superannuation system as a lump sum

Death Benefit Pension Planning

• Bill and Dawn’s $3.2m fund has grown to a $4m fund by

30 June 2018 each have two pensions

• Bill dies Oct 18 his two pensions revert to Dawn
• Dawn now has $4m in pension
• 12 months to deal with this
• What is the plan?

Death Benefit Pension Planning

Balance Jun-18 Oct-18 Oct-19 Component Bill Pension 1 1m Taxable Bill Pension 2 1m Tax Free Dawn Pension 1 1m 1m Taxable Dawn Pension 2 1m 1m Tax Free Death Benefit Pension 1 1m .6m Taxable Death Benefit Pension 2 1m 1m Tax Free Accumulation 2m 50/50 Lump Sum Payout .4m Taxable Total 4m 4m 4m

Transition to Retirement Income Streams

• Post 30 June 2017 earnings tax exemption provisions

now do not apply to a TRIS

• Post 1 July 2017 TRIS salary sacrifice strategy still

benefits those over 60, sacrifice amount is taxed at 15% whilst the pension paid is tax free

• Those with a TRIS can obtain CGT relief

CGT Exemption

Transitional CGT Relief Rules

• Allows funds to reset the cost base on CGT assets
• Election is per asset
• Two choices

– Segregated method – Proportionate method

• Elections to be done with 2017 income tax return

– Must be lodged by return due date or invalid

Transitional CGT Relief Rules

• Proportional asset provisions

– applies to pension assets acquired pre 9 November 2016 – assets selected have their cost base refreshed to MV – notional gain is determined by your fund’s exemption percentage at 30 June 2017

• Where the majority of the fund is in pension minimal gain

– any gain will form part of the net gains for the year unless deferred to when that asset is eventually sold

Transitional CGT Relief Rules

• For segregated current pension assets:

– applies to segregated pension assets acquired pre 9 Nov 2016 – assets transferred from retirement phase back to accumulation phase to comply with the $1.6 million cap will be taken to be disposed of and reacquired on the day of being transferred – unlike proportionate method doesn’t refresh all assets as its limited to the capital value of the reduction

Checklist

Checklist

• Review Salary Sacrifice Arrangements
• Members with balances over $1.6m – maximise NCC

as this could be final chance

• Utilise NCC for members with balances over $1.6m to

even up balances with spouses

• Utilise NCC for re-contribution strategies to improve

death benefit tax situation

Checklist

• Maximise NCC’s before making CGT rollovers
• Maximise personal contributions to untaxed funds to

claim a deduction before 30 June 2017

• Consider contribution opportunities that may be

available following the removal of the 10 per cent rule

• Look at contribution splitting and spouse contributions

Checklist

• Commutation resolution to be signed by 30 June 2017 for

pensions over $1.6m, pick high taxable pensions first

• Last year to maximise TRIS strategy, review whether your

TRIS should continue after 30 June 2017

• Have you retired or changed jobs after 60?
• Check that existing pensions are reversionary

Checklist

• Make sure CGT elections are made and that 2017 Fund

Income Tax Return is lodged by it’s due date

• Remember that those with TRIS’s can use the CGT election
• Valuations be very careful
• Don’t forget to pay you pension minimums!

Disclaimer

The material and opinions in this presentation should not be used or treated as professional advice and attendees should rely on their own enquiries in making any decisions concerning their own interests.