New super proposals $1.6m transfer balance limit, page-2

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bacci

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18/09/16

09:08

Post #: 19231787
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Originally posted by hlingh ↑

I am trying to understand better the super proposals proposed in May and the new changes handed down by the government this week…After reading many many articles on the subject, I think I am having some confusions on the $1.6m transfer balance limit and would appreciate advice here… Today newspaper AFR published a table which has entries for pension phase which say, “Transfer limit of $1.6m. Earnings tax-free on balances up to $1.6m. Above that, 15% tax”… I just re-read the Fact Sheet 2 on the budget.gov.au website. The Fact Sheet (correct at 15/9/16) has a Q&A which says “Q/ Does the cap limit how much I can hold in my retirement phase account? What happens if my retirement account grows in excess of $1.6 million?” “A/ The cap only limits the amount you can transfer into a retirement phase account it does not apply to the balance on that account. • Your balance can grow above $1.6 million in your retirement phase account. The cap does not apply to this subsequent growth.”
I think the AFR article needs clarification to say that for a retiree in pension account with balance over the limit on 1/7/17, he/she will need to either withdraw the excess amount from super or transfer the excess amount into an accumulation account with the earnings in the accumulation account to be taxed at 15%. And for a retiree in pension account with balance under the limit on 1/7/17, he/she can maintain status quo and there will be no cap to the amount his/her pension account can grow to after 1/7/17. Moreover, all the earnings on his/her pension account will be tax free after 1/7/17. Are the above “clarifications” correct? Many thanks in advance for your comments.

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hlingh,
My understanding is the same as yours. The 1/7/17 balance is critical. If your pension phase account is under $1.6m on that date the balance will always be 100% tax free no matter how high it grows.
If it is under $1.6m at that date the shortfall can be added later.

However this is simplistic. It is now likely that periodically the government will come and harvest the super accounts of the "rich" as regular fairness measures. Nothing is set in stone and even worse the government will prepare the way for this by legislating a vague purposes statement against which further raids can be justified.

Only the very naive believe in the stability of super savings now. How many politicians have said there will be no more tinkering after this... Fool me once shame on you, fool me twice shame on me.
bacci
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