PwC director of private clients Liz Westover said many SMSF trustees are getting confused about the rules that 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 said.
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 the measure for non-concessional contributions 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.”
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.