The Australian Government has released draft regulations as part of the 2016 Budget changes (Treasury Laws Amendment (Fair and Sustainable Superannuation) Regulations 2017).
Cooper Grace Ward Partner Scott Hay-Bartlem said there were some important changes in the draft regulations, particularly for SMSFs.
‘From our perspective in advising clients on handling of SMSFs, some of these changes were expected but others were not,’ he said.
The changes have been summarised as follows:
1. Superannuation death benefits can be rolled over in many situations.
2. Partial commutations of pensions will no longer count towards minimum pension payments.
3. Actuarial certificates will no longer be required for funds paying pensions that are only allocated pensions, account based pensions or market linked pensions.
4. Defined benefit funds can elect not to allow members to claim tax deductions for personal contributions.
5. The prohibition on funds accepting contributions over the fund-capped contribution limits is abolished (as the contribution cap rules now allow for them to be refunded anyway).
6. For a market linked pension, the pension terms can allow them to be partly commuted to remove an excess transfer balance, but only to the extent of the actual or expected excess.
The first two changes had been previously announced.
‘The last amendment is new and provides opportunities to commute an otherwise non-commutable income stream,’ Mr Hay-Bartlem said.
‘Also, if someone has both market linked and account based pensions and together they result in an excess transfer balance, under this proposed change the market linked pension could be commuted back to accumulation phase to remove even an expected excess leaving the account based pension in place.
‘It is important to be aware that to commute a market linked pension under these changes, more is required than to simply commute the pension.
‘The amendments allow the pension terms to allow a commutation, so first the pension terms must be amended to allow for the commutation. This could provide some issues, depending on the wording of the trust deed and pension terms.
‘Many of these amendments have been anticipated, but the ability to commute a market linked pension is an unexpected surprise that will be useful to many people who are otherwise locked in to excess transfer balance positions with these old pensions.’
Mr Hay-Bartlem, along with Partner Clinton Jackson, will discuss these changes in an upcoming roadshow across nine locations, as well as at their Annual SMSF Conference.
SOURCE: Cooper Grace Ward Lawyers
