ATO updates tax return form for legacy pension taxes
In response to the tax changes impacting capped defined benefit income streams, the ATO has added a new label to tax returns for individuals and created a tool for calculating an individual’s defined benefit cap.
From 1 July 2017, clients who receive income from a capped defined benefit income stream may have additional tax liabilities from the 2018 income year onwards, as previously reported by SMSF Adviser.
This applies if the income from all the client's capped defined benefit income streams exceeds their defined benefit income cap.
“For most individuals, the defined benefit income cap will be $100,000 for the 2018 income year. It may be less in some circumstances, including if your client turned 60 during the year or was over 60 and started receiving income from a capped defined benefit income stream for the first time partway through the year,” the ATO said.
To support the new way in which defined benefit income is taxed, the ATO said it has made changes to payment summaries and created a new label 7M in the tax return for individuals.
It has also developed a defined benefit income cap tool which helps individuals to work out if the defined benefit income cap applies to them based on superannuation capped defined benefit income streams.
“If the cap does apply it calculates the defined benefit cap, the assessable amount to be included in your income tax return and the amount of tax offset that may be allowable,” the ATO said.
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 also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.