The ATO has released a draft version of both LCG 2016/12 Superannuation reform: transfer balance cap and 2016/12 Superannuation reform: total superannuation for public comment, which include updates that reflect certain amendments made by the government in relation to TRISs and LRBAs.
In June this year, the government passed a law that meant that where loan repayments are paid from an accumulation interest, but the asset that’s been purchased under the LRBA is allocated to the pension interest, this will give rise to a credit in the member’s transfer balance account.
The technical amendment only affects segregated funds that enter into an LRBA on or after 1 July 2017.
SuperConcepts general manager of technical services and education Peter Burgess said this was essentially implemented as a preventative measure to discourage individuals from entering into strategies that allowed them to transfer value from the accumulation interest to a pension interest without it being caught under the transfer balance cap.
The draft version of LCG 2016/9 has been updated to include this change in the law and contains examples explaining how the measure will operate in practice.
“[This measure] is quite complex in situations where there's more than one pension member in the fund,” said Mr Burgess.
“In those cases you will have to proportion the value of the loan repayment between those members. So it's quite involved.”
Administrators and software providers, he said, will also have to made changes to their systems and processes to make sure they can recognize these types of events when they happen, do the proportioning calculations correctly and report these amounts to the ATO.
“The policy makers have gone to a lot of trouble here to stop a strategy which, even without these amendments, I suspect few SMSFs would be able or interested in implementing.”
The draft version of LCG 2016/12 has been updated to include the amendment that enables TRISs to be maintained through to retirement phase and receive a tax exemption on earnings where the member is aged 65 or has met a condition of release with a nil cashing restriction and notifies the superannuation provider of this fact.
Both draft LCGs are available for public comment until 27 October 2017.