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 premises that are incorrect, warns an industry lawyer.
Argyle managing principal Peter Bobbin said he often still comes across accountants who don’t understand that while super members can only transfer $1.6 million into pension phase, once in pension phase, the value of this money can increase beyond $1.6 million.
“Every day I'm finding someone, accountants may I stress too, who believe you get $1.6 million in your super that's tax free — full stop. What they don't know, or don't seemingly understand is that the rule is not $1.6 million in super that's tax free as a pension, that's just the maximum amount you're allowed to put in,” he explained.
“The example I give [to explain this], is if I have $1.6 million in super, and that's all I've got in super, so it's wholly in pension account, and I walk down to Randwick racecourse and put it on the four and the fifth. If I win I’ve then doubled the money, so I've now got $3.2 million in tax-free super.”
Alternatively, if the same person was to incur a loss of $800,000 they’ll then only have $800,000 in pension phase, he said.
“People are also making estate planning decisions and they have a complete misunderstanding of how the new rules operate,” he warned.
“They're planning their super strategies on premises that are simply wrong, and estate planning consequences will flow from that.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.