If you have a retirement pension
The ATO is introducing a $1.6 million cap on the amount of super you can transfer into a tax-free retirement account.
This will also affect defined benefit pensions. When you start a defined benefit pension, the ATO multiplies your annualised payment by 16 to produce a notional capital value. If your annual income is $100,000 or more then you reach the $1.6 million ‘transfer balance cap’.
What it means to you
If the starting balance (or the current value on 1 July 2017) of your tax-free retirement pension account (across all super funds) plus the capitalised value of your defined benefit pension is over $1.6 million, then you’ll have to pay tax on the excess.
You’ll need to either:
- transfer the excess from your taxfree retirement account back into an accumulation superannuation account, or
- withdraw the excess amount from your retirement account.
If your defined benefit pension alone puts you over the cap, you won’t be able to have a tax-free retirement account, and defined benefit pension payments over $100,000 will be taxed accordingly.