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Total superannuation balance

Superannuation measures impacted by total superannuation balance

Section: 18.1

Under superannuation reform, a client's 'total superannuation balance' measures the total value of a client's superannuation accumulation and income stream interests in both accumulation and pension phase at the end of the previous financial year.

A client's total superannuation balance is used to determine eligibility for a range of superannuation measures.

The measurement of a client's total superannuation balance at 30 June of the previous financial year is relevant for the following superannuation measures:

Non-concessional cap -Where a client's total superannuation balance is greater than or equal to $1.6 million at 30 June, their non- concessional contributions cap in the following financial year will be nil

-Where a client's total superannuation balance exceeds $1.4 million at 30 June of the previous financial year, the amount they can contribute under the bring-forward rule is restricted.

Government co-contribution In addition to the other eligibility criteria, a client's total superannuation balance at 30 June of the previous financial year must be less than $1.6 million to be eligible for the Government co-contribution
Tax offset for spouse contributions In addition to the other eligibility criteria, a receiving spouse's total superannuation balance at 30 June of the previous financial year must be less than $1.6 million for the contributing spouse to be eligible for a tax offset for spouse contributions
SMSFs: ability to use segregated method SMSF's and small APRA funds will not be able to use the segregated assets method to calculate exempt current pension income for an income year if:

-At least one superannuation interest is in retirement phase, and

-A member of the fund has a total superannuation balance that exceeds $1.6 million and they are a retirement phase recipient of an income stream, and

-The member has a superannuation interest (accumulation or retirement phase) in the fund.

Concessional contribution carry forward From 1 July 2018, a client's total superannuation balance at 30 June of the previous financial year must be less than $500,000 to be eligible to carry forward unused amounts of concessional cap for up to five years.

2017 Federal Budget proposal: Contributing proceeds from sale of home: Effective 1 July 2018

Individuals aged 65 and over will be able to contribute up to $300,000 into super from the proceeds of the sale of their principal place of residence. This measure will apply to a principal place of residence held for a minimum of 10 years.

These contributions will be treated as non-concessional contributions and will be in addition to any other voluntary contributions that people are able to make under the existing contribution rules and concessional and non-concessional caps.

The existing contribution restrictions for people over age 65 and the restrictions on making non-concessional contributions where a person's total superannuation balance is over $1.6M will not apply. However, these contributions will not be exempt from the transfer balance cap and will only be able to be used to commence a retirement phase pension where the member has remaining transfer balance cap space. The amount contributed will also be fully assessable under the Age Pension assets test.

While this proposal could allow an eligible couple to contribute up to an additional $600,000 to super over and above their existing concessional and non-concessional caps, it is likely to be more attractive for clients who are income tested or who are not receiving a means tested pension. For assets tested part pensioners, they would need to earn an after tax return of at least 7.8% on the amount contributed to break even.

At the time of writing this proposal is not yet law.

Last modified: Wednesday, August 23, 2017