The Treasury Laws Amendment (2017 Measures No. 2) Bill 2017, containing further amendments to the new superannuation rules kicking in on the 1 July 2017, has passed both houses of Parliament (on 15 June 2017).
It is going to be possible for the government to prescribe additional transfer balance debits and transfer balance credits using regulatory change rather than legislation. Arguably, it is easier to make regulations rather than pass a bill through the Parliament. Hence if any additional items are required implementation of these is going to be quicker — or one hopes this will be the case at least.
Transfer balance debit
Transfer balance debit under item 6 in the table of transfer balance debit is adjusted as follows. If a pension from a superannuation fund that is in retirement phase stops being in the retirement phase at a particular time (the stop time) — for instance, due to failure to comply with standards — then a transfer balance debit will arise at the stop time and the value of this debit will be equal to the value of the superannuation pension just before stop time.
Note that only superannuation income streams that are in retirement phase give the superannuation fund an entitlement to gain an exemption from income tax on investment earnings.
Transition to retirement
Several important changes are in place for transition to retirement income stream (TRIS) pensions. These pensions will be able to be in retirement phase on or after 1 July 2017 provided that the pension’s recipient satisfies one of the following conditions of release:
- Retirement (101)
- Terminal medical condition (102A)
- Permanent incapacity (103)
- Attaining age 65 (106)
The numbers in parentheses refer to the items in the table in Schedule 1 of the SIS Regulations.
Also, for the first three conditions of release above, the individual must notify the trustee of the fund that he or she satisfied the relevant condition of release. The TRIS will be in retirement phase from the date the trustee is notified. It is not necessary to notify the trustee about attaining age 65.
Additionally for TRIS, there is clarification in the latest amendments that a segregated TRIS is eligible for the transitional CGT relief.
There is also a change for individuals who received a structured settlement contribution at any stage and who are also receiving a superannuation income stream in retirement phase on 30 June 2017.
In limited circumstances, the amount of transfer balance debit that arises on 1 July 2017 in respect of the structured settlement contribution will be adjusted by the value of these individuals’ pensions as on 30 June 2017.
There is a big change for limited recourse borrowing arrangements (LRBA).
The changes only apply to borrowings arising under contracts entered into on or after 1 July 2017. They do not apply to the refinancing of the outstanding balance of borrowings arising under contracts entered into prior to 1 July 2017, or to contracts that were entered into prior to 1 July 2017 but that complete after that time.
An individual will receive a transfer balance credit where a superannuation fund makes a payment of an LRBA that results in an increase in the value of a superannuation pension. It is envisaged that this transfer balance credit can only arise where the payments of an LRBA supporting a pension are sourced from assets that do not support the same pension.