The ATO has busted five ‘myths’ around the superannuation changes applying from 1 July 2017.
ATO Deputy Commissioner for Superannuation, James O’Halloran, told a CPA conference that he wanted to “clarify some misconceptions” about the changes to super legislated late in 2016.
Myth 1: SMSFs have to report to the ATO on 1 July 2017
“There is a myth that SMSFs will have to report their member account balances to the ATO on 1 July 2017. This is not the case,” said Mr O’Halloran.
“The ATO does not require SMSFs to report their members account balances and values of any income streams on commencement of the super changes on 1 July 2017.”
However Mr O’Halloran did note that the changes do require certain events to be reported to the ATO. He said that the ATO was working with the SMSF sector to put in place transitional reporting arrangements in 2017/18 ahead of moving to “more timely” events-based reporting for the Transfer Balance Cap for 2018/19 and later years.
Myth 2: There will be changes to the three-year bring forward rule
“This is not the case. There are actually no changes to the three-year bring forward for 2016–17,” he said, while noting the changes going forward – including the lower non-concessional cap from 1 July 2017 and the rules tied to the Total Superannuation Balance.
Myth 3: There will be changes to the tax status of super pension payments
Mr O’Halloran said the changes were a limit on the amount that can be in pension phase, not changes to the tax status of pension payments to individuals.
“There is actually no change to the pay as you go (PAYG) withholding status of ordinary account-based pensions. For most people over the age of 60, pension payments will continue to be tax-free and not subject to PAYG withholdings.”
“However, if they receive non-commutable capped defined benefit pensions and annuities, and exceed the cap, then they may be subject to PAYG withholdings.”
Myth 4: The Transfer Balance Cap can be shared between couples
“This is not the case,” O’Halloran said. The Transfer Balance Cap applies to each member (with some modifications for recipients of superannuation death benefits) and is not shared between a couple.
“For example, one member of the couple cannot have $3 million in retirement phase and the other member have $200,000.”
Myth 5: The Transfer Balance Credit from an existing Term Allocated Pension (TAP) will be determined by the TAP’s account balance
“This is not the case. The TAP is a capped defined benefit income stream and different rules are used to determine how the TAP counts towards an individual’s transfer balance cap.”
“Instead, the credit amount is determined as the annual entitlement from the TAP multiplied by the rounded up remaining term, and this will always exceed the actual account balance.”
“However, if your TAP commences after 30 June 2017, the transfer balance credit value will be equal to the value of the account balance.”