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Budget makes reserves more important

Reserving strategies would become more powerful and relevant as a result of the new transfer balance cap of $1.6 million relating to the pension phase of superannuation funds handed down in the 2016 federal budget, according to an SMSF sector expert.

“Reserves now become all important because generally they do not form part of anyone’s account balance,” NowInfinity principal Grant Abbott said.

Abbott identified earnings reserves as having particular significance in the wake of the transfer balance cap contained in the budget.

“If advisers have clients in pension phase with an asset balance of $1.3 million or $1.2 million and the market is going up, make sure the earnings on these assets, particularly from here on in, are thrown into a pension reserve,” he recommended.

The proper segregation of assets was another procedure now critically important post-budget, he said.

“Asset segregation really will come to the fore rather than having pooled investment balances because what we’re going to want to do is make sure the really high growth assets are going to be sitting in the pension side of the SMSF,” he said.

He described the new rule as effectively reintroducing a reasonable benefit limit for superannuation balances in pension phase.

Strategies to accommodate the superannuation changes incorporated in the federal budget will be presented during the SMSF Strategies Day with Grant Abbott.

More information and event registration here.

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