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That's a very good point Smokey, it will probably require the house to be valued every year. Also if it is valued at say $1.2m and not rented, it could well cause some stress.
As requested:
Seriously, most unfortunate for you being on the wrong side of the ledger on this one.
It will only be curiosity on my part but I will watch with interest those who purchased property through the superannuation structure. A very lumpy product for an account-based pension in my view. In a private capacity I recently acted on behalf of an estate to sell a property to an SMSF and I think the purchaser may well be having second thoughts. Fortunately for the sellers, settlement is this week.
That's a very good point Smokey, it will probably require the house to be valued every year. Also if it is valued at say $1.2m and not rented, it could well cause some stress.
the lifetime limit of $500,000 will take into account all non-concessional contributions paid into super funds since 1 July 2007
AFAIK, the $1.6m cap is enforced at the time the account is switched to pension phase. There will be no need for the house to be revalued subsequently and the value of assets in the pension account can rise above the $1.6m threshold with no penalty.
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Just a coincidence I guess that the Costello 1 Million Dollar non-concessional contribution window in the 2006 Budget closed 30 June 2007 so won't be counted. That generation really got it super sweet.
If the value of the assets grow faster than that, I would have thought the excess would have to removed be annually, or why have a cap at all?
That's interesting, so why have a $1.6m cap, that is increased by average wage increases annually?
If the value of the assets grow faster than that, I would have thought the excess would have to removed annually, or why have a cap at all?
To stop you moving more than 1.6M into the tax free environment. Interesting question that I guess will be covered in the detail is whether there will be a minimum drawdown each year from the tax free environment or can you maxamise the accumulation whilst meeting the minimum withdrawal requirements from the 15% taxed environment.
In my reading this morning I've seen somewhere that pension drawdowns will remain but accumulation accounts will not be subject to drawdown. Sorry, I can't find the link, and I may be misquoting. Helpful, I know!
Anyone have any idea how the non concessional cap will be managed? Will there be annual limits? a bring forward option etc?
In my reading this morning I've seen somewhere that pension drawdowns will remain but accumulation accounts will not be subject to drawdown. Sorry, I can't find the link, and I may be misquoting. Helpful, I know!
That begs the question, what happens when you want to convert your second account , that is formed by your excess over the $1.6m cap?
Jeez it will take a while, for the dust to settle, on these changes.lol
I would think you are forced to wait until you've drawn down your existing pension below $1.6mill, then 'recast' a new pension of $1.6mill.
From Budget Paper No 2 2016
From 1 July 2017, the Government will introduce a $1.6 million transfer balance cap on
the total amount of accumulated superannuation an individual can
transfer into the retirement phase. Subsequent earnings on these balances will not be restricted. This will limit the extent to which the tax-free benefits of retirement phase accounts can be used by high wealth individuals.
Introducing a transfer balance cap will improve sustainability and fairness in the
superannuation system. Where an individual accumulates amounts in excess of
$1.6 million, they will be able to maintain this excess amount in an accumulation phase
account (where earnings will be taxed at the concessional rate of 15 per cent).
Members already in the retirement phase with balances above $1.6 million will be required to reduce their retirement balance to $1.6 million by 1 July 2017. Excess balances for these members may be converted to superannuation accumulation phase accounts.
A tax on amounts that are transferred in excess of the $1.6 million cap (including
earnings on these excess transferred amounts) will be applied, similar to the tax
treatment that applies to excess non-concessional contributions.
The amount of cap space remaining for a member seeking to make more than one
transfer into a retirement phase account will be determined by apportionment.
Budget Paper No 2 2016 - Page 28
From 1 July 2017, the Government will lower the Division 293 threshold (the point at
which high income earners pay addition contributions tax) from $300,000 to $250,000.
The Government will also reduce the annual cap on concessional superannuation
contributions to $25,000 (currently $30,000 under age 50; $35,000 for ages 50 and over).Budget Paper No 2 2016 - Page 24
From 1 July 2017, the Government will improve the flexibility of the superannuation
system by removing the current restrictions on people aged 65 to 74 from making
superannuation contributions for their retirement. People under the age of 75 will no
longer have to satisfy a work test and will be able to receive contributions from their
spouse.Budget Paper No 2 2016 - Page 27
The Government will introduce a $500,000 lifetime non-concessional contributions cap
to improve the sustainability of the superannuation system. To ensure maximum
effectiveness the lifetime cap will take into account all non-concessional contributions
made on or after 1 July 2007, from which time the Australian Taxation Office has
reliable contributions records, and will commence at 7.30 pm (AEST) on 3 May 2016.
Contributions made before commencement cannot result in an excess. However,
excess contributions made after commencement will need to be removed or subject to
penalty tax. The cap will be indexed to average weekly ordinary time earnings and is
estimated to have a gain to revenue of $550.0 million over the forward estimates
period.
The lifetime non-concessional cap will replace the existing annual caps which allow
annual non-concessional contributions of up to $180,000 per year (or $540,000 every
three years for individuals aged under 65).Budget Paper No 2 2016 - Page 29
From 1 July 2017, the Government will improve the integrity and fairness of the system
by removing the outdated anti-detriment provision.
The anti-detriment provision can effectively result in a refund of a member
’s lifetime superannuation contributions tax payments into an estate, where the beneficiary is the
dependant of the member (spouse, former spouse or child). Currently, this provision is
inconsistently applied by superannuation funds.
Removing the anti-detriment provision will better align the treatment of lump sum death benefits across all superannuation funds and the treatment of bequests outside of superannuation. Lump sum death benefits to dependants remain tax free.Budget Paper No 2 - Page 30
The Government will improve integrity in the superannuation system by removing the
tax exemption on earnings of assets supporting Transition to Retirement Income
Streams from 1 July 2017 (income streams of individuals over preservation age but not
retired).
It will also remove a rule that allows individuals to treat certain
superannuation income stream payments as lump sums for tax purposes.Perhaps there should be a higher lifetime cap for those over 50 and with a low balance, to account for those who were planning on stuffing money into super just in time for retirement.
Good points Junior, as Bill says getting a reasonable amount in will now be the issue for older Australians, for example if they sell an property.
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