The recent changes to superannuation rules have seen a seismic shift in the way we approach SMSFs and retirement planning, guests were told at a well-attended seminar in Brisbane on Thursday, 1 December.

The seminar, which also ran as a webinar earlier in the day, addressed the 2016 Budget’s changes to superannuation rules and how these affect people with money in SMSFs.

Scott Hay-Bartlem and Clinton Jackson, partners in Cooper Grace Ward’s commercial team, discussed the legislation and the effects already being felt in the industry around SMSFs and retirement planning.

‘What we are seeing is a fundamental change in the superannuation system, and advisers must get on top of the new rules and proactively review their clients’ situations,’ Mr Hay-Bartlem said.

Advisers must ensure, among other things, the following:

  • prior to 30 June 2017, every client’s pension balances fit within their transfer balance cap;
  • they have identified all superannuation interests their clients have and are aware of the person’s ‘total superannuation balance’;
  • before making superannuation contributions, that person’s ‘total superannuation balance’ is less than the condition for the relevant cap;
  • they know when clients on transition to retirement income streams satisfy an unrestricted condition of release and the pension documents immediately convert that into an account based pension;
  • which clients benefit from the removal of the 10% test for deducting personal contributions and the bring forward of unused concessional contribution caps; and
  • the estate planning arrangements of all clients with funds in SMSFs is reviewed to ensure they still achieve the desired outcome under the new rules.

‘One strategy that will come to the fore for clients with younger children is the availability of child pensions, as the treatment for transfer balance caps can be significantly advantageous’ said Mr Hay-Bartlem.

Mr Jackson said that advisers and clients should beware the temptation to lock into reversionary pensions without considering the benefit of maintaining the trustee’s discretion in choosing when an income stream is paid to a surviving spouse after death.

‘While reversionary pensions are useful estate planning tools, the new rules provide for a reversionary pension to count toward the recipient’s transfer balance cap 12 months after death. If the pension is not reversionary, we can choose the start date and therefore the date it counts toward the recipient’s cap,’ Mr Jackson said.

The new rules will have wide-ranging effects on SMSFs and estate planning, and it will be important for advisers to be familiar with strategies to achieve the best outcomes for their clients under the new regime.