The Coalition Government Budget of 2016 causes me much vexation on one front and yet sometimes we come up with a loophole to circumvent an issue…

The vexation is around the retrospective nature of the $500,000 lifetime limit of personal contributions (after tax money) and how unfair this is.  Simply, if a person had contributed this amount since 1st July 2007 and had made poor choices and lost much of that capital, they cannot make it back through contributions.  Very poor legislation if it goes through unchanged.

Also, the $1.6m pension cap is similarly poor legislation if unchanged…. it rewards those who can pick winners and avoid a future GFC event and severely penalise those who cannot….I would say that by far the majority will be in the latter category.   That is, once the pension has been commenced with say, $1.6m of capital, then subsequently the monies drop to 30% of that, that person cannot then start another pension!

There is a way of circumventing the issue as there are always tiny loopholes…for that you must ask me.  It is legitimate and will work yet does have risks – not legislative, rather in terms of absolute risk.   Again, curious?  Ask Steve!

The other loophole that I will expand upon is around the Transition to Retirement Pension and the change in taxation from 1st July 2017.   The proposed legislation is the removal of the tax exemption on earnings of assets supporting Transition to Retirement Income Streams from 1 July 2017.

This is a major set back.

The loophole as mentioned by many commentators in our industry, is to bring about a Condition of Release or trigger through a cessation of a job post age 60.  Thus, if you had two jobs aged 59 and one came to an end post age 60, you would, under superannuation law, (paragraph 22 of APRA’s Prudential Practice Guide SPG 280 Payment Standard you would be retired.  Thus a Standard pension would be allowed and 0% tax on the earnings on capital supporting the pension would continue.

we will wait to see who gets into power in July and thus whether this post is a waste of time or a trigger for you to receive proper advice about your superannuation.

of course, this is not personal advice and is general in nature.  Always seek professional advice from a Licenced financial adviser before acting on anything mentioned on this site.