Previously we discussed the usefulness of planning a reduced 30 June balance for the purposes of maximising non-concessional contributions. We also noted that even a minor reduction could have a major effect. The following possible strategies should be considered prior to 30 June. These are important where a trigger point is imminent but may also be considered as part of a long-term strategy of account equalisation between spouses.

Drawdown & Contribute to Spouse

Up to $540k may be withdrawn to recontribute to a lower balance spouse this year. You know the rules but be careful of tax for members under age 60. Remember that the first $195k of a withdrawal from the taxable component is tax free. Naturally you will need to draw from the unrestricted non-preserved component.

If you only have preserved monies then consider commencing a TRIS for this year only. This will at least allow you to withdraw 10% of the balance from preserved funds as well as maximise the fund ECPI for this year. Remember that a pension is a series of payments so, if this is the only year the TRIS will be operative, make sure you draw a number of payments to reach your total. Also, for those members under age 60, remember that this is the last year that you will be able to nominate that these payments be taxed as lump sums.

As standard pensions are comprised fully of unrestricted non-preserved components you may withdraw up to $540,000 to recontribute but be careful of Social Security ramifications. Where existing pensions are grandfathered for the purposes of deeming this grandfathering will be lost. The result could be a loss of the Seniors Health Card. It is possible that the member may not have any choice in the matter if they need to reduce their pension balance to $1.6m by 30 June 2016 as the resultant accumulation account in their name will generally be deemed in any case.

Contribution Splitting

85% of a concessional contribution may be split to a spouse. Remember that this will occur in the year following the contribution so it will still be counted in the 30 June balance for the year in which it was made. This may be useful in supporting the lower balance member but, in the event that a higher balance member is not advantaged it may be beneficial to split to the higher balance member so as to prolong the entitlement to contribute NCCs for the lower balance member.

Other methods will be considered in the next article.