From 1 July 2017 the Transfer Balance cap was set at 1.6 million but from 1 July 2021, the amount a Member can have in a tax-exempt pension within Super is increased to 1.7 million, but will be proportioned for each Member based on the highest ever used cap limit.
Any amounts in excess of the cap will need to be transferred out of the tax exempt pension phase, either back to the accumulation phase (earnings taxable at 15%) or out of the superannuation system entirely as a lump sum. Although transfers to the tax exempt pension phase will be limited to $1.6 million, there are no restrictions on how much a Member can continue to hold in the accumulation phase. If your pension balance is over $1.6 million, you will need to make a request to convert part or all of your pension accounts into accumulation phase to ensure that your total pension balance does not exceed $1.6 million. You can download the minute template by clicking on the button below:
If you have a pension balance of over $1.6 million, you might need to purchase an actuarial certificate to determine which portions of the SMSF are taxed at 15% and which portions are tax free. For more information on actuarial certificates, please click on the button below:
If your total pension balance is over $1.6 million, you will not be able to use the segregated method for the SMSF’s assets. For more information, please see the Tax Office Video below:
The purpose of the transitional CGT relief is to provide temporary relief for certain CGT assets that will lose the tax exemption in complying with the new transfer balance cap and TRIS.
As Trustee of a super fund, you have access to temporary CGT relief if one or more of the Members in the SMSF are affected by the changes.
If the asset are held throughout the period 9 November 2016 to 30 June 2017, Trustees can choose to apply temporary CGT relief.
Applying CGT relief will:
Certain events that impact on the Transfer Balance Account must be reported to the Tax Office under Superannuation Transfer Balance Account Reporting regime (TBAR). For more information on TBAR Reporting, please visit our page here.
If your pension balance is over $1.6 million, we will automatically reset the asset cost base in a most tax effective manner to take advantage of the CGT relief.
It is an ATO requirement to note the cost base reset in the SMSF Financial Reports and Tax Return. The below Tax Return extract shows where the cost base reset is reflected in the SMSF Tax Return.