Substantial changes to the superannuation rules took effect from 1 July 2017 and one of them is the introduction of a $1.6 million transfer balance cap. Effective since 1 July 2017, a $1.6 million superannuation transfer balance cap has been imposed on the lifetime amount of superannuation that an individual can transfer into retirement phase. The question that must be asked is there any rule of thumb when adopting a strategy to commute the pension amounts that are over $1.6m for rolling back into accumulation.
The method DBA Lawyers special counsel Bryce Figot suggested involves a comparison between the amount an SMSF member has to draw down and the level of investment return generated by the supporting assets. Though this may sound relatively simple there are a few other key elements to consider such as the taxable and tax free components of the pension when there are more than one pension interest in the fund, who are the dependent beneficiaries etc.
Make sure you have everything covered off correctly – the following articles cover some general rules, guidelines and strategies to look at when deciding which pension to commute first.