Superannuation Law Changes 1 July 2017
Legislation was recently passed that may affect superannuation for you or some of your clients, and this will come into effect from 1 July 2017. This could mean that important decisions need to be made in the lead up to 30 June.
Changes include, but are not limited to:
- A $1.6 million superannuation transfer balance cap (from your accumulation phase superannuation account to a tax-free ‘retirement phase’ account)
- Lowering non-concessional contribution cap to $100,000 per annum
- Lowering the concessional contributions cap to $25,000 per annum
What is the $1.6 million transfer balance cap?
With effect from 1 July 2017, the amount of superannuation that an individual can transfer from their accumulation account into a tax-free retirement account will be capped at $1.6 million. This will apply to both current retirees and individuals yet to enter their retirement phase.
What does this mean for individuals with more than $1.6 million?
If a fund has, or expects to have, more than $1.6 million in pension phase at 1 July 2017, the fund may need to start planning to implement some decisions prior to this date. This could mean withdrawing funds or transferring the balance greater than $1.6 million into an accumulation phase super account, and potentially accumulating capital gains. Your tax accountant or financial advisor would be the best person to help you with this decision.
Reducing Capital Gains Tax (CGT)
If the superannuation fund is a self managed super fund (SMSF) in retirement phase, and the $1.6 million cap affects it, the fund may be eligible for CGT relief. This would involve resetting the value of the cost base of an asset owned by the fund to market value as at 1 July 2017, and if this base is higher than the original cost base, it could potentially reduce the amount of capital gains paid if assets are sold at a future date.
In order to reset the value of an asset, a valuation as at 1 July 2017 would need to be conducted. In addition, it is the responsibility of the SMSF trustee to submit an application to the ATO within a specified time frame.
“Except for the most straightforward valuation processes, valuations undertaken by persons experienced in their field of valuation would be expected to provide more reliable values than those provided by non-experts.”
“The valuation process should be adequately documented; if it isn’t, we may not accept the resulting value as a market value.”
Market Value for Tax Purposes: Read more
There are many factors which need to be taken into account in deciding the best course of action regarding the new superannuation laws, and there are specific eligibility requirements which need to be met in order to qualify for CGT relief. Seeking CGT relief requires careful thought, and we recommend that advice is sought from a financial advisor and/or tax accountant before making or acting on any decisions.
Our team of valuers at Property Valuation & Advisory have extensive experience in the valuation of property assets. Please contact us if you would like more information, or to discuss a valuation requirement.
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