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If you have a retirement pension

What’s changed

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.

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