Further ATO guidance on super reforms

Thursday 08 December 2016

The Australian Taxation Office (ATO) has published a third draft Guideline on the superannuation reform measures. The Guideline (LCG 2016/D10) clarifies how lifetime defined benefit pensions and annuities, will be treated for the new $1.6 million transfer balance cap that applies from 1 July 2017.

The draft Guideline confirms that defined benefit income streams will count towards an individual’s transfer balance cap. These income streams will be assigned a ‘special value’ which, for lifetime pensions, will be calculated by annualising the first pension payment and multiplying that amount by 16. The ‘special value’ will then be credited to an individual’s transfer balance account. However, a defined benefit income stream on its own cannot result in an excess transfer balance.

The draft Guideline also confirms that from 1 July 2017, a defined benefit income cap will also apply to limit the tax concessions available for income from defined benefit pensions where the annual pension income exceeds a threshold of $100,000. The tax treatment will depend on whether the pension is paid from a taxed or untaxed source.

Comments on the draft Guidelines are due by 23 January 2017.

Further information

ATO, Law Companion Guideline LCG 2016/D10 Superannuation reform: defined benefit income streams – non commutable, lifetime pensions and lifetime annuities

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