Strategy Matters

Untaxed Elements

Section 307-290 of the ITAA states that an untaxed element may be generated, resulting in an additional 15% tax being applied to taxable death benefits, where non-tax dependants receive a lump sum payment if a deduction for life insurance premiums or future service has been taken. The untaxed element is calculated as follows: Firstly the taxed element...

Super Terms

Retirement Phase A member is in the retirement phase when they start a pension which entitles the pension account to exempt current pension income. Essentially this will include any pension except a transition to retirement pension. Account Based Pension Account Balance This is the physical balance of all the member's account based pension accounts. It may differ from the...

Small Business CGT

If you make a personal super contribution using the capital proceeds of the sale of certain small business assets, and you may elect to exclude them from your non-concessional contributions cap. You are only eligible to do this when one of the following capital gains tax (CGT) concessions applies to you: the small business 15 year...

Recontribution Strategy

There are two versions of the recontribution strategy - tax and account equalisation. When applied to the purpose of reducing tax the aim is to increase the proportion of tax free component over taxable component in the member's account. There is no benefit to the member. There is, however, a potential benefit to the member's non-tax dependent...

Pension Cap Breach

We report pension commencements and commutations on a monthly basis. This is more frequently than is required at law however it reduces the possibility of an inadvertent breach and ensures, if one does occur, it is identified quickly and can be rectified with the minimum of damage.  The system is flawed as, currently, data is not...

Lumpy Assets on Death

Consider Julian and Justine, both aged 70. They each have reversionary pensions and are the only fund members. Julian has a $4m balance and Justine, $2m. Fund assets comprise a $5m property plus assorted shares, fixed interest and cash. On 30th June 2017 they reset the cost bases of selected assets. These will include the property and...

CGT Cost Base Reset

The CGT cost base reset was introduced to reduce the onerous future tax effect that would follow the movement of assets from pension mode to accumulation mode at 30 June 2017 as a consequence of the limitations of the transfer balance cap. This is to provide a compensatory mechanism for the imposition of tax on assets that...

Reversionary Pensions & the TBA

The application of the transfer balance account to reversionary pensions is best explained by an example. John has a reversionary pension worth $1 million at the time of his death on 1 August 2017. The pension reverts to John’s wife, Heather. Heather already has her own pension and a transfer balance account balance of $800,000. Unless Heather acts...

Indexing the Transfer Balance Cap

The indexation of the transfer balance cap is best explained by way of an example. Bill is 65 and has an account based pension balance of $800,000 on 30/6/2017. Bill's retirement phase (pension) account was $800,000 at 1/7/2017. This established the opening balance of his transfer balance account. As he had no retirement phase record prior to 1/7/2017...

Pension Caps

From 1 July 2017, there is a $1.6 million transfer balance cap on the total amount of accumulated superannuation an individual can transfer into the tax–free retirement phase. Subsequent earnings on balances in the retirement phase are not capped or restricted. This means that a member may have a transfer balance cap of $1.6m but hold...