SMSF trustees are mixing up the two $1.6 million caps, confusing the $1.6 million transfer balance cap with the $1.6 million balance restriction for non-concessional contributions, according to PwC.
PwC director of private clients Liz Westover said many SMSF trustees are getting very confused about what rules apply to each measure.
“For pension accounts you have debits and credits that go into that balance, it’s simply how much you can transfer into a pension account, now it can grow over time, that’s fine, but it’s essentially how much you transfer in,” Ms Westover clarified.
For non-concessional contribution tax purposes, Ms Westover said the trustee’s balance on the 30th of June dictates their ability to make non-concessional contributions.
“When you start to add in debits and credits and all sorts of things, people start to get confused about how it applies to one and not the other,” she said.
“I think in some ways, if we’d used an entirely different number of the two measures it would have saved some confusion, but the fact that we keep talking about this $1.6 million threshold, it’s just causing some confusion.”
Ms Westover said in regard to the measure for non-concessional contributions, it is merely a number.
“If my balance is below that number, I can make non-concessional contributions, if it’s above that number, I can’t,” she said.
“Whereas with the application for pension transfer amount, it’s a transfer amount and it can have debits and credits and so on, and you can commute amounts; and the application is quite different compared with your ability to make non-concessional contributions.”
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
- 23 Aug 2017'No apparent benefit' in ATO positionBy Katarina Taurian
- 23 Aug 2017Transfer balance cap confusion posing risks for practitionersBy Miranda Brownlee
- 23 Aug 2017TBAR reporting tipped to expose illegal adviceBy Miranda Brownlee
- 22 Aug 2017Contentious views on segregation locked inBy Katarina Taurian
- 22 Aug 2017Contributions spike for 2016-17 financial yearBy Staff Reporter
- 22 Aug 2017ATO targeting illegal retirement schemesBy Staff Reporter
- view all
- Transfer balance cap confusion posing risks for practitioners
Confusion around certain aspects of the transfer balance cap could be leading some practitioners to provide advice to clients based on premi...read more
- view all