Warning for SMSF trustees: New superannuation pension cap of $1.6m now in place.
The maximum amount of superannuation that can be used to fund a tax-free pension in retirement is now restricted to a cap of $1.6 million per member.
For example, say you are over age 60 and have met a condition of release (such as retiring from the workforce), or are over 65, and wish to start a pension. Prior to 1 July 2017, there was no limit on how much with which you could start a pension.
This had two positive effects. Firstly, all of the pension income was tax-free to you as a member, and secondly, all earnings on the assets used to fund your pension were also tax-free.
The Transfer Balance Cap rules came into effect from 1 July 2017, meaning that when transferring a member’s superannuation accumulation balance to pension phase to start what is now called a ‘retirement phase pension’, you are restricted to a maximum of $1.6 million per member and any balance above that will need to remain in accumulation phase.
If you are above age 60 and have met a condition of release, you can still cash out lump sums from your accumulation balance tax-free, but the earnings on those assets within the fund will be taxable at the (albeit concessional) rates applicable to superannuation, rather than being tax free.
To read the whole article click here: https://bit.ly/2HwCIw7