One of the major impending changes to SMSF regulations is that all Australians will be limited to having a $1.6 million balance in a tax-free retirement or pension account from 1 July 2017.
People that transfer their pension balance in excess of the cap back to accumulation phase or withdraw the excess balance from super entirely before 30 June 2017 will be able to take advantage of the transitional CGT rule introduced by the government.
The transitional CGT rule allows a superannuation fund to elect to reset the cost base of assets to their current market value.
The transitional CGT rules only applies for the year ending 30 June 2017 and requires the fund to make a non-revocable election to reset the relevant assets' cost base.
BDO has warned that the moving of assets above $1.6 million from pension phase to accumulation phase after 30 June 2017 will lead to earnings, including capital gains, on those assets in accumulation phase attracting tax at 15 per cent and generally 10 per cent on capital gains.
BDO said that three categories of SMSFs are affected by the CGT relief rule, and that it may also be applicable to some institutionally managed super funds, such as wrap accounts.
The first is an SMSF with one or more members, where any one member has more than $1.6 million in pension phase across all of their superannuation funds and that member is required to commute some or all of their pension account in the SMSF to comply with the $1.6 million transfer balance cap.
The second is an SMSF with one or more members where any one member has more than $1.6 million in pension phase, and that member or other members have an accumulation account.
The third is an SMSF that is paying a Transition to Retirement Income Stream (TRIS).