Small funds prohibited from using segregated assets method in some situations
From 1 July 2017 SMSFs and small APRA funds will be prohibited from using the segregated assets method where:
- During the year, there is at least one retirement phase interest in the fund (eg, an account based pension), and
- Just prior to the start of the year, a particular member of the SMSF:
- has a total superannuation balance of more than $1.6 million, and
- is receiving a retirement phase income stream (from any fund).
The Government has also announced it will make regulations to remove the requirement for SMSFs paying account based income streams to obtain actuarial certificates. At this stage no further detail has been provided.
Low income super tax offset
The low income super contribution has been abolished from 1 July 2017. From that date, it has been replaced by a low income superannuation tax offset, which essentially continues the same concession.
The low income superannuation tax offset seeks to return the tax paid on concessional contributions, if the individual is a low income earner with adjusted taxable income of $37,000 or less.
The low income superannuation tax offset provides for a Government contribution of 15% of the first $3,333 of concessional contributions (up to $500) made by an eligible superannuation member.
Anti-detriment payment abolished
Under the current rules, where a lump sum death benefit is paid to a spouse, former spouse, or child, the fund may increase the death benefit by paying an anti-detriment payment.
This payment can be calculated in a number of ways, but is often equal to 17.65% of the deceased superannuation member’s taxable component.
Earnings tax exemption extended to deferred income stream products
Under the current rules, a superannuation income stream qualifies for tax free earnings if it is currently paying income stream payments.
However from 1 July 2017, the earnings tax exemption will be extended to deferred superannuation income streams (including guaranteed annuities and group self-annuities) that commence paying income stream payments at a later time.
Deferred superannuation income streams will be defined separately in Regulations yet to be made.
For a deferred superannuation income stream to qualify for an earnings tax exemption, it must be held by someone who has already satisfied one of the following conditions of release:
- Reaching age 65
- Terminal medical condition
- Permanent incapacity
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