Age Pension

Super confused? The ATO is here to help

Jun 12, 2017

The Australian Taxation Office wants to help you understand the upcoming changes.

As the July 1 deadline for the changes to superannuation draws closer, you may still be confused about how these changes may or may not affect you.

The Australian Taxation Office spoke directly to Starts at 60 and outlined some of the key questions you should be asking yourself or your financial advisor in order to be prepared.

The ATO’s assistant commissioner superannuation Graham Whyte said the first thing you should be asking yourself is how you’ll be affected as there were many factors involved.

“If you have a transition to retirement income stream (TRIS) then earnings from assets supporting these accounts will no longer be tax-free,” Whyte said.

“If you have or are starting a ‘retirement phase’ account to receive your pension income, there is a new limit on the amount you can transfer into your pension account(s) that will be tax-free.

“Other factors that will lead to you being affected by the changes include if you’re making extra contributions to your super; if you earn over or close to $250,000; if you and your spouse earn less than $40,000 a year; if you’ve taken time out of the workforce or you work part time.”

Whyte advised that while you may not immediately be affected by the July 1 changes, it was important to remember you could be affected in the future.

Next, Whyte said to ask yourself who you need to contact – whether that be a financial advisor, planner or tax agent – to discuss how the changes might affect you as you may need to act quickly before June 30.

“If you think you’ll be affected but don’t have a financial adviser, you can get more information from your super fund(s) and can also ask them if the changes affect you,” he said.

Once you’ve been in touch with someone who can advise you on how the changes may affect you, Whyte said you should be asking that person for a plan of action while also arming yourself with as much knowledge as you can.

“Australians will be affected differently depending on their individual circumstances – it’s important to check the ATO website to determine how you will be affected,” he advised.

“For example, starting 1 July 2017 there is a new concept of the total superannuation balance. The ‘total superannuation balance’ is a way to value your total super interests on a given date.”

Whyte explained that your total superannuation balance was important for working out your eligibility for things like tax offsets, co-contributions and contributions caps.

“If you are a trustee of a self-managed super fund (SMSF), your total super balance also determines whether you can use the segregated assets method to calculate exempt current pension income,” he said.

“Total super balance is generally calculated at the end of 30 June each financial year (and) this will allow you to determine which measures you can use in the next financial year.”

Regardless of whether or not you are affected, Whyte said it was still a good opportunity to reassess your superannuation and start collating your own records for the future.

The next question you should be asking is what are the key dates?

While many of the major superannuation changes will begin July 1, Whyte warned that you’ll need to take action prior to this if you know you’re going to be affected to ensure you, and your super, were prepared for the changes.

Another question Whyte said you may ask yourself is, what if you don’t do anything?

“We recommend that everyone starts figuring out how they will be affected by the changes now and to take the appropriate action, to make the most of their superannuation retirement savings,” he advised, warning that in some instances, people may have to pay additional tax if they don’t organise their accounts before July 1.

“For example, from July 1, there will be a limit on how much of your superannuation you can transfer from your accumulation phase accounts into tax-free retirement phase accounts to receive your pension income,” he said.

“This is known as the ‘transfer balance cap’ which starts at $1.6 million. If you exceed your cap, you may have to remove the excess and pay tax on the notional earnings on that excess.”