New $1.6 million Pension Asset Reforms

From 1st July 2017 there has been an introduction of a Transfer Balance Cap. What this basically means is that if your pension entitlement balance is over $1.6 million you will be required to transfer an amount back into your accumulation account as at 30 June 2017. This means that from 1 July is you have more the $1.6 million in your pension account any earnings that are made over and above this amount will be taxed at 15%. For example if you have a pension fund with a balance of $2 million, from the 1st July 2017, you will be required to transfer $400K back into your accumulation phase and any earnings from this $400K will be taxed at 15%, where as previously it would have been taxed at nil. For anyone who has a pension entitlement under $1.6 million the rules will remain unchanged and you will still be taxed at the rate of nil.

There is a lot to consider if you have a pension balance greater than $1.6 million and professional advice should be sought to ensure any future tax liabilities are kept to a minimum.