New pension advice requirements | December 2017

In the November edition of Super Tech Update we addressed the new pension reporting requirements under the transfer balance cap. This month, we look at changes to pension advice following the recent super reforms.

From 1 July 2018, SMSFs with members who have over $1M total superannuation balances will have to report transfer balance cap credits and debits within 28 days after the end of the quarter that they occur in. For instance, if you start a new pension on 1 July 2018, this credit will need to be reported to the ATO by 28 October 2018.

Credits and debits can be reported to the ATO via a paper-based form from the 1 October 2017 and we hope to see an electronic reporting system up by 1 January 2018. What is interesting to note is that the credit and debit reporting requirements, request detail of whether the income stream is:

  • Super income stream
  • Reversionary income stream
  • LRBA repayment
  • Child income stream (death benefit or reversionary stream)

This will place pension income stream documentation under further scrutiny to ensure the documentation is clear as to which type of benefit is being paid.

What is important to note is that pension withdrawals do not count as a debit against the transfer balance cap, so clients will need advice on how to best manage their income streams and withdrawals, to preserve as much of their exempt current pension income streams as possible.

Death benefit review and estate planning considerations to SMSFs has always been undercooked. The super reforms put a heightened focus on the importance of these documents and considerations, with compulsory cashing and payment of lump-sum death benefits now a possibility for clients.

The days of instructing a client to start a pension and have an annual discussion about minimum pension payments is over.

Under the new super reforms and reporting requirements, your clients need advice in relation to:

  • Pension reporting requirements under the transfer balance cap and which pensions should be allocated to the transfer balance cap
  • Transition to retirement income streams and whether to continue from 1 July 2017 (if applicable)
  • Pension strategies from 1 July 2017 to preserve transfer balance cap and maximise tax-exempt pension income within the fund
  • Strategies to see if we can bring member balances closer to parity which could minimise compulsory cashing requirements on death and maximise tax-exempt income
  • Once off CGT relief available for 2016/17 (if applicable)
  • Death benefit review to see what arrangements are currently in place and amend if required to ensure the benefits hit their mark

We will provide further details in the new year of our pension review and advice solutions, to ensure your clients are informed and structured to maximise their super benefits under the new super regime.

In the meantime, if this article has raised any questions for you, please contact John Lethbridge, SMSF Specialist Advisor on 1800 333 143.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.