From 1 July 2017, the government will introduce a $1.6 million cap on the total amount that can be transferred into the tax-free retirement phase for account-based pensions.
This means that SMSF members who have more than $1.6m total in their pension accounts (both within their SMSF and with APRA regulated superannuation pension accounts) will need to commute the excess amounts ABOVE $1.6m prior to 1 July 2017.
The challenge is that SMSF members cannot know the balance of their pension account as at 30 June 2017 until after their SMSF accounts are finalised for the period ending 30 June 2017.
To overcome this issue, the ATO has issued PCG 2017/5 which enables SMSF members to elect to commute the excess amounts over $1.6m as at 30 June 2017 before they know their final member account balances.
How to make a partial commutation request:
Advisers using the services of Superfund Wholesale can request a commutation for impacted clients via the online pension request form available via our Adviser Portal:
Select option 4 on as per the screen shot below:
Complete the necessary details and submit the form. You will be emailed a copy of the Pension Commutation requests for your clients to sign and return to Superfund Wholesale before 30 June 2017.
Obtaining pension member details
To determine which of your clients will be impacted by the changes and will need to commute / partially commute their pensions, we recommend you obtain a list of your clients pension account balances from our team.
Email us at email@example.com to obtain a list of your pension clients including pension balances or contact your Account Manager.
Who should complete this form?
This form should be completed for each fund member who:
- is affected, or is likely to be affected, by the $1.6 million transfer balance cap; and
- wishes to commute their excess to an accumulation interest within the fund (if you wish to withdraw the excess from your fund, do not use our documents and instead contact us for further instructions);
- hasn’t yet taken action to comply with the transfer balance cap from 1 July 2017.
When determining if you are affected, or are likely to be affected, by the $1.6 million transfer balance cap, you need to consider the combined value as at 30 June 2017 of all of your superannuation income stream(s) in the fund as well as superannuation income stream(s) you may have with other funds.
DO NOT include transition to retirement pensions in this calculation.
In addition to the online pension commutation requests available via our Adviser Portal, attached below are Word document versions of the commutation requests (single and multiple pension accounts). These documents can be used for mail merges etc. if required.
PCG 2017/5 is available in full on the ATO website here.