Super reform 2017

A once-in-a-decade change program for Australia’s superannuation system

The measures to implement the Government’s super reform program, originally announced in the 2016 Federal Budget, became law on 29 November 2016.

They include: 

  • changes to both concessional and non-concessional superannuation contributions caps
  • the introduction of a $1.6 million pension cap
  • changes to taxation of transition to retirement income streams
  • consequential transitional CGT relief, and
  • a range of other measures. 

Most of the reform measures are effective from 1 July 2017.

Access insights from our super reform experts: Macquarie Technical Services

We know you need the right information at the right time to be able to support your clients through periods of significant change, such as this one. Macquarie Technical Services and other specialists within Macquarie have analysed the reforms and turned the jargon and complicated elements into helpful insights for you and your clients.

Macquarie Technical Services’ insights on the super reform, including articles, insights, webinar recordings and more, can be accessed using the button below.

Super reform resources

A little bit about Macquarie Technical Services
A little bit about Macquarie Technical Services

Macquarie Technical Services helps you provide quality advice by sharing their deep technical knowledge and expertise. They do this by providing technical solutions and strategies through workshops, email updates, online publications and apps. They also keep you up-to-date with relevant news, analysis and legislative developments, such as the super reform program.

Five changes everyone must know

The pre-tax superannuation annual contributions (also known as concessional contributions) cap will be reduced to $25,000 from 1 July 2017.  If your client was 49 years of age or older on 30 June 2016, they may contribute up to $35,000 of pre-tax contributions by 30 June 2017, otherwise (if younger) their limit is $30,000.

  • The Government will no longer proceed with the proposal to limit after-tax super contributions (also known as non-concessional contributions) to a lifetime limit of $500,000.
  • Instead, the after-tax super contribution annual cap will be reduced from $180,000 to $100,000 from 1 July 2017. If your client is under 65 years of age at any time during the income year, they can ‘bring forward’ two future years of contribution capacity. Importantly, the existing threshold of $180,000 per annum (and $540,000 on a ‘bring forward’ basis) remains in place until 30 June 2017. 
  • From 1 July 2017, if your client’s total superannuation balances across all super funds exceed $1.6 million on 30 June 2017, they will not be able to make any after-tax contributions in 2017-18.  If their total superannuation balances is less than $1.6 million but exceeds $1.4 million, they will be subject to a scaled back after-tax contribution capacity.
  • The amount your client will be able to transfer into the tax exempt pension phase of superannuation will be capped at $1.6 million from 1 July 2017. Any existing superannuation pensions will be assessed against the cap based on the 30 June 2017 balances of those accounts. Amounts assessed as being in excess of the cap will need to be transferred out of the tax exempt pension phase, either back to the accumulation phase (taxable at 15 per cent) or out of the superannuation system entirely.
  • Although transfers to the tax exempt pension phase will be limited to $1.6 million, there’s no restriction on how much your client can continue to hold in the accumulation phase, which is taxed at the concessional rate of 15 per cent.
  • As pension payments are not required from the accumulation phase, some individuals may find their post 30 June 2017 arrangement is a better long term strategy than their existing position.

From 1 July 2017, the investment earnings of TTR pensions will no longer be exempt from tax. 

A CGT relief election has been introduced to alleviate the possible CGT consequences of the $1.6 million cap and taxation of TTR pensions. The CGT relief will help preserve the tax free status of capital gains accrued while supporting a pension.

Macquarie super product FAQs

$1.6m transfer balance cap

The Government has introduced a limit on the amount of superannuation that can be converted to a tax free superannuation income stream of $1.6m. This is called the ‘transfer balance cap’. If an individual’s transfer balance account exceeds the transfer balance cap, they will need to reduce the balance before 1 July 2017, to avoid penalties applying.

Learn more about the $1.6m transfer balance cap

Yes. Specific assets (shares, managed funds or term deposits) may be selected and partial holdings of assets (excluding term deposits) may also be transferred.

Where listed securities or units in a managed fund are partially transferred, you will need to ensure that a marketable parcel size is transferred back into the accumulation account and a marketable parcel size also remains in the pension. A marketable parcel size is generally $500.

Please also ensure enough cash remains in the pension to meet ongoing pension payments, and the minimum cash requirement is transferred into the accumulation account. This is $2,500 for Manager and Consolidator products and $250 for Accumulator.

For clients who currently don’t hold a super accumulation account, you can use the new Super and Pension online switch functionality to open a new super account to transfer benefits to. To access the online form, launch the ‘application tool’ on the wrap website home screen and select ‘Create Super or Pension switch’.

This intuitive form will guide you through the process of transferring benefits back into the new super account. The online form reduces processing follow ups and allows you to avoid delays in client correspondence – once you complete the online form an email is sent to your client to authorise. Once authorised the account is created.

For clients who already hold an existing super account, you can use the Super and Pension switch form. We have recently optimised this form to provide you with administration efficiencies.

Note: if you have a remuneration agreement that includes grandfathered conflicted remuneration under FOFA, please use the paper based switch form.

We will ensure all complete requests to transfer funds from pension to super phase will be processed prior to 1 July if they are received by us before 5pm, Friday June 9, 2017.

If a request is received after this date it will be completed on a best endeavours basis. If a request is received on or before 9 June 2017, and is incomplete or requires follow up, and the additional information is not received by this date, will also be completed on a best endeavours basis.

For listed securities or units in a managed fund moving back to accumulation that have multiple purchase parcels, the parcels that will be transferred back to accumulation phase will be on a first in first out (FIFO) basis. This is the same method we currently apply to our superannuation accounts for CGT purposes.

Clients can already transfer assets and request for cost bases to be reset. Please refer to the IDPS Guide for information on asset transfers and any applicable fees as they relate to transfers and cost base changes.

A superannuation contributions report can be downloaded from the Macquarie Wrap website. Log in to the adviser website and generate the ‘Superannuation Contributions Report’. This is accessed via: Reporting > Client & Adviser > download files > download adviser reports > Superannuation Contribution Report.

This report provides you with your client’s name and account number, product name, date of birth and the total amount of concessional and non-concessional contributions that have been made each financial year for the last five financial years. 

CGT relief and the cost base reset

Superannuation funds are able to reset the cost base of assets that are transferred from pension to accumulation phase to comply with the transfer balance cap requirements or because of the changes to the taxation of transition to retirement pensions.

To be eligible for the CGT relief, the asset must have been held in pension phase as of 9 November 2016 and continue to be held by the fund just prior to 1 July 2017. This time period is the ‘pre-commencement period’.

Learn more about CGT relief and the cost base reset

Yes. CGT relief will be available for assets transferred from pension to accumulation phase to comply with the transfer balance cap and the introduction of tax on transition to retirement pensions.

Transactions to effect the relief will be processed from October.

The new cost base will be:

  • for assets transferred from pension to accumulation phase: the market value of the assets transferred to an accumulation account at the time of transfer, or
  • for eligible TTR assets: the market value of the assets on 30 June 2017.

A solution for SMSF clients will be provided and more information will be provided once it is available.

Macquarie, in its capacity as trustee, intends to apply the CGT relief on clients’ accounts if the asset is transferred back to accumulation phase in a gain position. We will not be applying the CGT relief on assets in a loss position.

We will be writing to advisers in July notifying them of the client accounts where we intend to apply the relief. Advisers, on their client’s behalf, will have the opportunity to opt out of the relief on any assets of their clients that are eligible for the relief.

We will provide clear guidance on this process in our CGT relief communication to advisers, including the deadline for providing notification.

TAP and TTR pensions

From 1 July 2017, transition to retirement pensions (TTRs), will no longer receive the earnings tax exemption for assets supporting the pension. Effectively, they will be taxed in a similar way as accumulation accounts.

Learn more about TAPs and defined benefit pensions

Yes, we will continue to offer TTRs after 1 July 2017.

Recent legislation requires that where a member with a TTR pension retires, is permanently incapacitated, has a terminal medical condition or reaches age 65, their TTR needs to convert to a standard account-based pension.

Where a member turns 65, we will convert their pension to a tax free ‘standard’ account based pension. Were a member notifies us they meet one of the other conditions of release noted above, we will also convert their pension.

The conversion of the pension may have transfer balance cap implications for your client.

No. Draft regulations permitted this, however when the regulations were finalised the ability to partially commute benefits from a TAP was removed.

Yes: we will offer CGT relief for assets transferred from pension to accumulation phase as a result of the introduction of tax on transition to retirement pensions.

We will also allow the claiming of CGT relief on eligible assets that were held in a TTR on 30 June 2017.

This process will be as described above for the $1.6m transfer balance cap (i.e. on a per asset basis).

Your client can sign and return a ‘Retirement Declaration Letter’ to advise us of the specific condition of release that has been met. Please click here to access the form.


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