Since 1 July 2017, a cap of $1.6 million has been imposed on every Australian, limiting the amount of super that can be transferred into retirement phase (what we previously called pension phase). Although the transfer balance cap will be indexed in $100,000 increments, the transfer balance cap for both the 2017/2018 year, and the 2018/2019 year, is $1.6 million.
For Australians in retirement phase (pension phase) before July 2017 and who had more than $1.6 million in super pension accounts as at 30 June 2017, the new rules effectively forced Australians to remove the excess super benefits from retirement phase.
Note: Most retirees now need to monitor two lifetime superannuation amounts – their transfer balance cap, and their transfer balance account. The new policy applies to both pre-July 2017 super pension accounts in retirement phase, and post-July 2017 super pension accounts in retirement phase, which effectively means the policy applies retrospectively.
For those have been around the super industry for a long time, like myself, you might be feeling rather flat. Have we not been here before, and did we not have a previous Liberal government (and have these policies supported by subsequent ALP governments) who thankfully removed this mindless complexity to save retirees stress and cost in their later years?
The explanatory memorandum pages for the $1.6 million transfer balance cap runs to roughly 70 pages, then there are the numerous ATO Law Companion Guidelines (covering the transfer balance cap generally, the transitional provisions for CGT relief, two relating to death benefits and the transfer balance cap, two covering defined benefit pensions, and one dealing with commutations to meet the requirements of the transfer balance cap), plus a fact sheet, plus legislation and related materials. Throw in a suite of ATO Guidance notes. Phew!
As I have written many times before, using a sledgehammer on the retired population to deal with a small minority of retirees who may be receiving too much of a tax advantage from the super system is lazy policy and wastes good industry brains who now have to spend a ridiculous amount of time administering a flawed policy. What was needed were special rules to deal with the four or five thousand of Australians with many millions in super, rather than forcing this massive compliance cloud over all retirees who are just trying to live their lives.