Do you know what's com­ing?

Monthly Chronicle - - Front Page - PETER VICK­ERS Peter Vick­ers is a Char­tered Ac­coun­tant in Lind­field, added in­sur­ance broking ser­vices to his busi­ness group 20 years ago to help clients pro­tect their as­sets.

You may be aware that the lat­est changes to su­per­an­nu­a­tion start on 1 July this year. From that date the max­i­mum con­ces­sional con­tri­bu­tion is $25,000 and the max­i­mum non-con­ces­sional con­tri­bu­tion is $100,000 with the bring for­ward rule of the next two years still ap­ply­ing.

How­ever the other change is that there is a limit of $1.6 mil­lion that can be used to start a pen­sion, with the re­main­der hav­ing to be left in the ac­cu­mu­la­tion phase. The pen­sion phase is in­ter­est­ing in that the tax rate on the in­come earned on the as­sets sup­port­ing the pen­sion is 0% - yes zero! You can­not get it bet­ter than that.

For the past 10 odd years, su­per fund mem­bers didn’t have to worry about in which of the two spouses the fam­ily had their su­per. The only time it mat­tered was when one of the cou­ple was in pen­sion phase and the other was not.

Now this has changed. If you have more than $1.6 mil­lion in su­per then you don’t want it all in a sin­gle name.

If you have ob­tained a con­di­tion of re­lease and your spouse meets the work test then you could with­draw an amount and then have your spouse re­con­tribute it in their name within the con­tri­bu­tion lim­its.

An is­sue also arises if you have a re­ver­sion­ary pen­sion. If a per­son dies then a re­ver­sion­ary pen­sion goes to a spouse or a de­pen­dent mi­nor child. If the re­ver­sion­ary pen­sion is added to any cur­rent pen­sion and if the to­tal is over $1.6 mil­lion then it must come out of the zero tax­pay­ing su­per fund. The re­ver­sion­ary pen­sion is no­tion­ally added to the ex­ist­ing pen­sion 12 months af­ter death. The plan­ning pro­ce­dure is to move the ex­cess from the ex­ist­ing pen­sion to ac­cu­mu­la­tion phase so that when the re­ver­sion­ary amount is then added, the to­tal is below $1.6 mil­lion.

Af­ter 1 July, if you are over the $1.6 mil­lion cap then you are un­able to make fur­ther non-con­ces­sional con­tri­bu­tions, so if you have the spare cash and are el­i­gi­ble to bring it for­ward, then you should do­ing con­sider this.

If you have more than $1.6 mil­lion in your su­per fund, don’t panic. There’s noth­ing that you need to do. The ac­coun­tants will han­dle this by jour­nal en­try and you pay an ex­tra amount of in­come tax.

If you are young then you may think that this isn’t rel­e­vant to you - but it is. If your con­tri­bu­tions are only go­ing into one name then the bal­ance could grow in 30 year’s time to over $1.6m and then you have a prob­lem. None of this plan­ning should be done without an ad­viser - it’s too easy to get it wrong.

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