A pre-30 June superannuation checklist

This year is going to be an extraordinarily busy period. With substantial preparation and planning to be done, particularly for those clients with high super balances, many of the decisions to be made need to be assessed based on the individual members of the fund and their future plans and intentions.

Changes should not be made without considering the individual circumstances of each of the members. No plan or strategy in place can be assumed to be compliant or appropriate in light of these current changes. Below are some key areas and points for practitioners to consider ahead of the changes.

Reduced non-concessional contribution (NCC) caps

The 2017 financial year is the last chance to contribute up to $540,000 before changes to caps, bring-forward provisions and loss of eligibility to contribute for those with balances in excess of $1.6 million.

• Ensure bring-forward provisions have not already been triggered in the past two years.

• Members must be under 64 at some time during the current financial year to be eligible to access bring-forward provisions and if aged 65 or over at the time of the contribution, the work test must be satisfied as well.

• NCCs can be made for children under the age of 18.

• If the full $540,000 is not contributed this financial year, ensure clients are aware of the transitional NCC cap that will apply to them from 1 July 2017.

Existing income streams – transfer balance cap

Individuals with pension accounts in excess of $1.6 million will need to commute amounts in excess of this balance back to accumulation accounts.

• If you have multiple super accounts, ensure the transfer balance cap is not exceeded in total as penalties can apply.

• Where income streams are being received from a defined benefit fund or a constitutionally protected fund or where the income stream is a market-linked (term allocated) pension, a notional transfer balance cap will need to be calculated using a set formula. While these notional amounts will not of themselves result in a breach of the transfer balance cap, the notional balance will be necessary to determine how much can be used for a pension with other super accounts.

• Once amounts have been transferred to the pension account (or reduced to $1.6 million), investment growth in these accounts will not affect the transfer balance cap. That is, the $1.6 million cap is a transfer balance cap only, not an ongoing balance cap.

Capital gains tax relief

Capital gains tax (CGT) relief is only available to those with income streams already in place on 9 November 2016 that are either transition-to-retirement income streams (TRIS) or have underlying balances above $1.6 million. In both cases, an amount will be required to be transferred out of the pension back to accumulation to comply with the new laws.

• Different methodologies for calculating CGT relief are available depending on whether assets are segregated or unsegregated. The date that can be used for calculating CGT can also differ.

• Irrevocable elections need to be made in order to access CGT relief, including whether to use the relief available and whether to defer any tax liability.

• It may not be in the member’s interests to elect to take up CGT relief. If the fund will in the foreseeable future be predominantly in pension phase anyway, electing to use CGT relief may actually crystallise a CGT liability that would not otherwise exist in years to come.


Those currently in receipt of a TRIS will not only need to determine whether taking up CGT relief is desirable for them, but also whether they wish to continue to receive a TRIS.

• TRISs are still permissible, but they will not be eligible for the tax concessions in the fund they currently enjoy.

• If a TRIS is no longer appropriate from 1 July 2017, don’t forget to turn it off. Document the cessation of the TRIS and stop any direct payments from the fund to the member. Members of larger funds should notify their fund if they no longer wish to receive a TRIS.

• Those currently receiving a TRIS may have already satisfied a condition of release that would enable the TRIS to be converted to a normal account-based income stream.

What is the law?

Ensure you and your clients are familiar with the laws that actually passed through Parliament. Since the original announcements in the 2016/17 federal budget, there have been quite a number of amendments. Make sure strategies being developed and implemented are aligned with laws passed and not with old announcements that did not proceed. These include the $500,000 lifetime NCC cap that was scrapped, the work test now being retained and the CGT relief being introduced for existing income streams.

There are a number of changes to caps and thresholds that affect most superannuants. It will be important for advisers to ensure they and their clients are aware of these new amounts.

• Anyone undertaking salary sacrificing arrangements for additional super contributions may need to adjust these to ensure they stay under the new, reduced $25,000 CC cap.

• Tax offsets for spouse contributions will be more widely available with the eligibility threshold increasing from $13,800 to $40,000.

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